Saturday, January 30, 2010

The Dictator Game

I'm reading "Super Freakonomics" and came across an interesting story. Somehow, it seems I always end up reading something relevant to the days events. The day I read this happened to be a couple of days before the State of the Union address.

The economic games/experiments described in "Super Freakonomics" helped me understand why the President and Congress are so quick to take our money.

There are two classic games "Ultimatum" and "Dictator" used as experiments by economists for determining human behavior.

In Ultimatum, there are 2 players. One is given $20 and is asked to offer any amount to the second player. If the second player rejects the offer, neither player gets any money. The average offered was $6. It was usually rejected if it was less than $3.

In Dictator, the main difference was that the second player got no input. Surprisingly, the "dictators" were very generous.

An economist, John List, thought these experiments didn't agree with real human behavior. He tried a couple variations:

The first variation: Dictator game with an additional option of being able to take $1 from the second person. The result was that fewer people gave money. The power to take people's money (taxation) makes you less generous!

The second variation: the Dictator game, but the first person is told that the second person also was given $20. They are told that they can still give any portion of their money, or take any of the second persons money. The result was that only 10% gave money, more than 60% took money, and most surprising more than 40% took ALL the money. Taking money from the rich makes you want to take ALL the money!

3. The final version of the game was the same as the last version, except that both players had to WORK for the $20. The result was that only 28% of the players took money away and 2/3 neither gave nor took a penny. We respect other people's property more when everyone works for what they have!

The last version is my favorite. I think it is evidence that a free-market economy is the best option. So what does this have to do with the State of the Union address this week?

Congress and the President are acting like dictators in game 2. What they don't realize is that they are actually playing the "Ultimatum" game and the American voter is about to "reject" their offer and vote them out of the dictator position. Test results won't be in until November.

Tuesday, January 12, 2010

Apple vs. The Czars

My son had his Apple iPod Nano stolen at school. I don't remember if it was from his backpack or his locker. I do remember that I got mad at him for bringing it to school in the first place. This all happened before Christmas and his birthday, so an obvious present for him was a replacement MP3 player.

I was concerned about replacing it just to have it stolen again. I would prefer he buy it with hard earned money in order for him to place greater value. I wanted to keep our losses to a minimum by buying the cheapest alternative.

Notice all of the "I"s in the previous paragraphs.

So what did my son ask for? An Apple iTouch. Ouch! That's an expensive alternative! Of course my lovely wife thought we should get the iTouch, since she has a different philosophy:
  • Christmas and birthday presents are supposed to be about what the recipient wants.
  • Presents don't have to be practical.
Luckily she helped me realize that I was acting a little too much like a czar. A czar is all about top down decision making. The czar knows best.

So my son got an iTouch and I got a LG Chocolate Touch cell phone. The LG is the first new cell phone I've ever had, since I am always practical and take the hand-me down phones from my wife.

The LG Chocolate Touch is pretty cool.
The iTouch (and iPhone) is ABSOLUTELY AMAZING!
So what's the difference?

The difference is top down planning vs. free market. Both LG and Apple use top down development to create cool technologies, but Apple uses the free market to completely blow away LG. The difference is in the "apps" or applications you can use.

Apparently LG uses the czarist or top down approach. The czar defines what will be on the phone and the peon developers implement their plan. I'm not insulting the developers; just the czars. The developers probably have a lot of great ideas, but weren't allowed to do them or had no incentive.

Apple, on the other hand, understands the amazing power of the free market. They made it relatively easy to create apps for the iPhone/iTouch, provide a store for selling your apps, and give you 70% of the selling price! (I bet the LG developers are lucky to get 1% of the selling price of their apps). The result is over 100,000 very cool apps.

Why does this work? It's all about the protection of "life, liberty and the pursuit of happiness". Get rid of the czars and let the people create freely. Give people cool options and they will spend money.

Here's a few of the iTouch apps:
  1. Koi Pond - Relax while you watch koi fish in a pond. Touch the water and it sends ripples and the fish scatter. Hold your finger steady and the fish come and nibble on it (at 4:50 in video).
  2. Earthscape - Spin the earth and zoom into anywhere to see satellite imagery. Find your house or go to Paris or Egypt.

  3. Shop Savvy - Find the cheapest prices. Take a picture of a bar code and find out the lowest price and where to buy it online.
  4. Flute - Hold your iPhone like a flute and blow into the microphone to create music. Use the Google Earth map to find other people playing their flutes and listen to their music.
  5. Finger Twister - Like the classic game twister, but you play with two fingers with a friend.
  6. Level - Use your iPhone as a bubble level. Place it sideways on a shelf or picture frame to see if it is level.

  7. Fishing - Pick a fishing spot, make a casting motion with your iPhone and then real in the fish using the touch screen.



Thursday, January 7, 2010

I'm a racist; and a pacifist

I'm reading a great book: "Nonsense: Red Herrings, Straw Men and Sacred Cows: How We Abuse Logic in Our Everyday Language". After learning about all of the wrong ways to make statements, I decided to take notes on what the non-abusive, logical way to speak.

One example is "name calling". The non-abusive way to call someone a name is to:
  1. Define what the name means.
  2. Provide evidence that the person meets the criteria of the name.
Let me now apply these rules to the title of my blog. I'll start with the less emotionally charged word.

Pacifist

1. The Definition
Pacify = "to bring peace"
Pacifist = "someone who loves to bring peace"

Note that the suffix "-ist" modifies the root word as "someone who loves ..."

2. The evidence
My mom was the first one to call me a "peacemaker" when I tried to get the neighbor boys to stop hurting their dog.

Racist

1. The Definition
Race = "the manifestation of inherited physical characteristics"
Racist = "someone who loves race"

Note: my definition is quite different from the usual definition.

2. The evidence
I was raised in the Mormon church, which historically discriminated against blacks in that they were denied ordinances beyond baptism. When I was 14, I read a book called "A Black Mormon Tells Her Story", by Wynetta Willis Martin. I was so impressed by this book that I wrote about it in my journal. This is what I wrote: "Reading this book has really changed my impression about blacks and our church. I now know that someday, blacks will be able to hold the priesthood...". A photo of my journal is below, along with an interesting entry a year later, when the Mormon church changed their policy on blacks, giving them full rights to all church ordinances.

My father worked at a family business in South Central Los Angeles. I would occasionally work Saturdays and when I got older, I would work summers. One of my first regular jobs was stock boy (before that I swept floors, cleaned, etc.). I worked alongside another employee, Delores, and we became good friends. Delores was also Mormon (and black) and her husband was one of the first black Mormon bishops. My next job was deliveryman and I visited hundreds of homes. This was a good way to break racial stereotypes that a suburban white boy might have developed. I met alot of very nice people (Most people are nice when you deliver a working refrigerator, regardless of what race they are).

When I turned 19, I applied to go on a mission for our church. I still remember telling my dad that I would like to have a black companion (mormon missionaries are always paired in companionships). Companionships are assigned, so you don't get to pick your companion. You learn alot when you spend every waking hour with someone who was previously a complete stranger. I have to admit that this was challenging; until I got my last companion. He was black. We had some amazing experiences and a lot of fun. He was also the most compatible companion I had my whole mission and our friendship raised the bar for what I looked for in a relationship.

Later, in graduate school I worked with people from Japan, Taiwan, India and Europe. Our lunches were multicultural exchanges. I loved it.

Years later, my best friend at work was Asian-American. He was a good friend at a challenging time in my life. He invited me to play in a 3-on-3 basketball tournament at his church and I ended up being one of a few white guys (everyone else was Asian). I must say, yt was the friendliest basketball I've ever experience.

So in conclusion, I love race; therefore, I'm a racist.

My Journal Entries: