Matt Nolan

More on the economics of love

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There is an excellent article on the Stuff website about the economics of love, an issue we’ve written about a couple of time before.

While I enjoy using economic concepts to describe relationships, I hadn’t actually considered the fact that we have a lot more cold hard data now-a-days with online dating!  I quite enjoyed this:

Economist and chief executive of economic consultancy Lateral Economics, Nicholas Gruen, agrees internet dating has increased the efficiency of the market for love, but hints at a harsher reality for love-seekers.

”One obvious point is that online dating generates vastly more hard data about dating – so we’re getting much better information than we used to have. It’s showing that dating is very like a market with strong ‘objective’ values around which assortative mating takes place.’’

Assortative mating is the idea that people with highly valued attributes, such as good looks or intelligence, tend to pair up with similarly endowed partners. Most people think they are ranking people according to their own subjective values, says Gruen.

“But if you look at the evidence, there is a very strong assortative mating going on, so the best footballers typically have the best looking girlfriends and all that sort of stuff.

‘‘You mightn’t think it’s counter intuitive, but it’s certainly counter to the narrative of love – depressing for those of us who would like to buy into the idea of love as sui generis, but not so surprising if we look around.’’

Another example where looking at cold hard incentives trumps over believing there is some other guiding force that will magically help us out – superb.  Maybe I shouldn’t be so mean about the idea of hope – but to be honest, hope is more about consumption value than anything else right 😉

Update:  On rereading, some people may find that statement a lot harsher than I intended.  All I was meaning was that love and relationships do be appear to be based on preferences and choices, rather than appearing at random – and I’m generally a fan of being able to conceptualise things which makes me happy.

Let’s just hope that a recognition of the objective factors that are valued in the marketplace to relationships doesn’t lead to government interventions – or taxation … although I wonder if anyone will try to point out market failures in the dating market.

Will Taylor

Ch-ch-changes – new theme/commenting system

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Howdy loyal TVHE readers.

We’ve just done a bit of an upgrade/refresh to the blog theme and commenting system.

The two major changes are:

  1. The theme is “responsive” so should re-size and look normal on any device
  2. Comments are being done through Disqus which allows a little more interactivity.

Comments can still be left with just a name and email address allowing anonymity for those who choose etc… but if you want you can use twitter/FB or use a Disqus account.

Let us know if you have any issues with anything. If people have problems with Disqus we can pretty easily go back to the native WP system.

Matt Nolan

Journalist ideological, can’t read

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This seems like an insulting and bigoted statement – and it is.  It is an arrogant statement that reflects more poorly on me than anyone I could be writing about!

I just felt that if I was going to write about this piece discussing inequality in healthcare provision by Auckland University, I should start with a title that is in the same vein as the authors first sentence:

Economists have proven it’s cheaper to let Maori children die than spend money to provide equitable health treatment.

Seriously, they are writing about a piece that identifies inequities in the provision of healthcare services, and states that the cost of ensuring equal treatment would cost $25m (in net terms).  If we take treatment of other groups as the level of treatment we want to provide to be “fair”, then this is the cost of ensuring that this fairness is given to all groups – given whatever reasons they’ve identified for unequal treatment in our healthcare system.  The press release by Auckland University is here.

Do you get any of this from the journalists article?  No, not really – they even mess up the tenses, essentially stating that the government “would save” $25m by putting inequalities in place … when the research is merely describing inequalities and talking about the costs of remedying them.  There is further discussion on “economic impact” which try to sell why we should change policies, and I wouldn’t want to go into them in detail without looking at the work – however, giving the impression that these authors want to perpetrate further inequality through this first sentence is insulting, not just to the academics involved but to anyone who does this sort of work!

I would normally ignore the nonsensical ramblings of a journalist on issues they don’t understand, but they had to go and attack “economists”.  We get this crap all the time, the very fact we are willing to discuss and mention trade-offs makes people who can’t be bothered thinking convinced that we cause the trade-off.  By daring to say that increasing the provision of healthcare costs money, the journalist has decided to give the impression that the economist at Auckland Universtity (who was working in conjunction with people from other disciplines) is immoral.

Personally, I think writing articles piled with misinformation based on an unwillingness or inability to read a university press release has a larger degree of “immorality” than an economist discussing trade-offs.

Matt Nolan

Where are we with the Eurozone at the moment

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It’s been a while since I’ve written down my impression of what is going on and what is happening with New Zealand – because things are just not changing.  The events in Europe continue to have a significant impact on what is going on in New Zealand, both by lowering businesses willingness to invest in staff and other forms of capital and by lowering the returns to exporters (more than its reduced the price of our imports).

However, we are currently in the middle of a fascinating example of political economy – something I am poorly versed in, and so will instead just link to.

The Eurozone needs a lender of last restort, a credible lender of last resort.  The weird actions going on in Europe are indicative of some institutions recognising this, while other groups who have to take on any perceived risk (eg Germany) are less than willing to do so.

Of course, the belief that the Eurozone needs a lender of last resort depends on the “multiple equilibrium” view of credit markets in Europe – are these banks truly insolvent, or do they just look insolvent because of liquidity/expectations.  If you are in the first camp there is a burden that must be shared in some way, if you are in the second camp there is much less of a real burden – and a strong requirement of a lender of last resort.  The different things being said by different people inside and outside of Europe are not just a result of a normative belief in what is a “fair distribution of the burden”, but also a different implicit model which implies different costs and benefits from different policy actions.

No wonder agreement has been so difficult.

jamesz

The forecaster as a storyteller

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Paul Krugman explaining the IS-LM model:

[T]he first thing you need to know is that there are multiple correct ways of explaining IS-LM. That’s because it’s a model of several interacting markets, and you can enter from multiple directions, any one of which is a valid starting point.

Which beautifully illustrates this point:

There seem to be two ways of understanding things; either by way of a metaphor or by way of a story, …[and] the metaphorical and narrative explanations answer to each other.

The metaphors McCloskey refers to are what we commonly term ‘models’; the narrative is the story that justifies the model’s existence. The metaphor provides a framework for the narrative, as the narrative provides a context for the metaphor. The importance of this interdependence is that models are empty without a narrative to explain why they exist. Equally, a historical narrative is of little help if it doesn’t give rise to a generalisable metaphor that we can use to simulate counterfactual worlds.

Krugman’s introduction to IS-LM (a macroeconomic metaphor) illustrates not only the importance of the narrative but also the fact that multiple narratives can support the same metaphor. This ties in really well to Matt’s discussions of the value of economic forecasting. The value in forecasting is not in the predictions that our models make about the future, but in the usefulness of the narrative the forecaster tells. That narrative varies across forecasters depending upon the relative importance of various actors in their story, despite the fact that they all have pretty much the same model of the economy in mind. That may help explain why they all tell a different story and yet profess to largely agree about all the important issues.

jamesz

Morality in sport

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NYT:

On Tuesday night at the London Games, some of the world’s best badminton players hit some of the sport’s worst shots. Sad serves into the net. Returns that sailed far wide. …On Wednesday, four women’s doubles teams — two from South Korea and one each from China and Indonesia — were disqualified. …The eight players were found to have tried to lose their matches intentionally, apparently because they had determined that a loss would allow them to play a weaker opponent in the next round.

I don’t really understand the moral outrage over this. The competition is set up such that winning it is easiest if you lose some matches, but there are also sporting norms that say you have to do your best to win every game. Obviously, when the rewards to winning the competition are high, those incentives will over-ride the norms of sporting conduct. It’s no surprise that teams would try to throw a match, although I am surprised that they did it so obviously: you’d think they’d practice this sort of thing a lot if most competitions work this way.

There’s a more technical discussion of incentive compatibility constraints in the design of the competition over at Cheap Talk.