Grey Swan

USA Today’s article “Some see Boston shrines as nuisances” gives an informative discussion about the appearance of memorial shrines in Boston and other inner cities. While they may look similar to the 9/11 memorials, they are in fact an ode to all sorts of proles. Most of the ‘victims’ are gang members and serial criminals. Residents who live near these shrines find them both psychologically draining and physically dangerous – they tend to attract violent crowds. Since every day more people die, every day there are more shrines. If you look at the pictures, it is beginning to look like a war zone.

Unfortunately, attempts to remove these shrines have met with upheaval. One woman comments that “In the black and Hispanic inner city, this is how we grieve.” So minorities grieve by enshrining criminals? The article correctly asserts that these memorials are sending the wrong message, but it doesn’t seem likely that Boston will be cleaned up anytime soon. The problem (in my opinion) is that we are too tolerant. Boston is the classic liberal North Eastern city that is divided between the black and Hispanic inner city, and the wealthier surroundings. Unfortunately, those areas which are not crime ridden tend to be filled with people who believe that violence in poor neighborhoods is somehow their fault *.This is the so called ‘white guilt’ phenomena. People are willing to accept worse behavior from minorities than they would from each other in order to avoid any accusations of racism or intolerance. But would we allow memorials for the 9/11 hijackers? I hope not.

Perhaps we can learn something from game theory. Game theory holds that the most successfully strategies are those which are initially cooperative, but are willing to punish others if someone ‘defects’. Strategies that are always cooperative work well with each other, but will be exploited in the long run. In order to prevent this from happening, we as Americans should not allow such ridiculous memorials on public property. If we do, it is just giving the mouse another cookie.

* I want to make it clear that I am not accusing all or most or even many of the people in the inner city of being criminals. Just that there are proportionately more. However, many of the people who die from violent crimes are criminals because deaths frequently come from inter gang conflict.

Half Sigma has an interesting post about distressed jeans being trendy. He notes that distressed jeans are significantly more expensive than new jeans, and consequently cannot be bought by everyone. In essence, they are a way of broadcasting to the world ‘I am wealthy*’. This is quite similar to the upper middle class’ obsession with luxury cars. While a BMW generally has more horsepower and gadgets than your average Nissan, it is functionally identical. Yes, you can speed down the highway a little easier in the Beamer, but most of the car’s value comes from other people knowing that you have it. This is not some contemporary idiosyncrasy. Historically, it was considered ‘high class’ to be pale. This showed that you did not have to spend time outside laboring in the fields. In most of the world, being pale is still a status symbol. In the West, being tan is now admired because it shows you have enough free time to head outside and enjoy the sun.

You can argue that price is all determined by supply and demand, and it is. But what is the reason for demand? In this case – Status! What is slightly disturbing about this is that status is a zero sum game. If you move up a notch, by definition, someone else must move down. Consequently, a large amount of resources are spent on competition that does not benefit anyone. It is a reversed free rider problem. People spend resources that they would not have to if they could sit down and come to an agreement. I believe realizing that status (and distressed jeans) are zero sum has at least two important implications.

1. It is one factor in the spiraling price of luxury goods (A Blog on this expansive topic tomorrow)
2. It may help us predict how the market will react to certain items. For Example, we should not discount an item because it seems so expensive (such as a 1000 dollar martini with a 300 dollar jewel on the bottom of the glass). An item that is overpriced, but whose price gives public recognition to its purchaser may not in fact be overpriced**.

I know that identifying status as zero sum is not new, but I believe that it has important implications when mixing with globalization (because the number of people better off than you seems to increase).

* The best argument illustrating how a high price can feed higher prices is…college. A certain school (whose name eludes me) was suffering declining applicant rates. In order to reverse this trend, said school raised their tuition in line with the Ivy League. The next year their applicant pool increased. Why? Because people searching for colleges saw the high price tag and assumed it had to be good place. The higher price made it less accessible yet more desirable. This is very important as it suggests that college is (to some extent) also a zero sum game.

** Also, indirectly: Consider a world where two companies both produce one type of nail clipper, and sell it for two dollars. One of the companies could simply repackage one of these nail clippers and sell it for more. This way, it would have two identical, differently priced products. Many people would believe that the more expensive nail clippers were better, and choose them.

After reading the New York Times article “TB Patient is Isolated After Taking Two Airline Flights,” I have come to believe that we are beginning to lose the war against bacteria. The article mentions a strand of extreme drug resistant TB that is mostly untreatable. Unfortunately, drug resistant bacteria are becoming more and more common with each passing day. The problem, I believe, is not that our rate of technological innovation is too slow, it is that the ‘Doctrine*‘ we use in applying our technology is antiquated.

We need to improve our tactics in order to prevent and reverse the trend of drug resistant disease. Currently, doctors tell their patients to complete the required dose of a certain antibiotic, with the hope of eliminating the infection quickly. We then cross our fingers and hope that the disease does not evolve any defense. No global effort is coordinated**. We really need to use evolution against bacteria. Since bacteria is always evolving through random mutations, if a particular drug type is not used, resistance to this drug will erode. This is similar to why animals that live entirely in caves have no vision. The idea is that we rotate different drugs in cycles. If we resist using a particular drug that has become generally ineffective, like penicillin was for a while, when we reintroduce it, it will once again act like a ‘miracle’ drug. Consider that penicillin has become more effective as people have stopped using it. If we entirely stop the use of a particular drug, this will happen much faster***. Of course, this would require world wide coordination, but in the long run it has the potential to save many lives.

* Consider that in World War II, the French army was nearly as well equipped as the German army. However, Germany had invented a combined tactics approach to warfare that became known as Blitzkrieg. Using this superior Doctrine, French resistance was effectively defeated in just a few weeks.

** This is akin to having an army made up entirely of platoons, with little or no higher authority to organize it.

*** I have done some research into evolutionary adaptations, mostly through computer simulation. What I have found is that once an adaptation is in place, even slight positive evloutionary pressures will maintain or improve that adaption despite genetic drift. That is why the wholesale prohibition on certain drugs would drastically increase the rate at which bacteria lost resistance to them. Actual research should be done, but I would guess rotating drugs in 10-20 year cycles would be very beneficial.

Robert Axelrod’s interesting book The Complexity of Cooperation uses computer simulation and agent based modeling to examine real life phenomena. One particularly interesting model employs computer agents to examine the spread of culture. In this model, each agent is randomly assigned a set of ideas that represent ‘culture’. Agents freely spread and adapt each others ideas over the course of generations. The closer two agents’ cultures are, the more likely they are to adopt each other’s beliefs. In the end, a number of ‘cultures’ emerge that share little or no cultural characteristics in common. This happens despite the fact that all agents initially share a large number of ‘ideas’.

The point of this model is (and I will not explain the model in any more detail, if you are interested check the book out) that the spread of ideas does not facilitate the adoption fo a global belief system. In fact, Axelrod’s model demonstrated that it can actually schism groups of people who previously had much in common*. I think this concept applies to the modern world. Currently, many people in the west believe that the majority of the world will or currently does share their liberal beliefs in democracy, peace, freedom of expression, etc. However, we should take lessons from Iraq, Somalia, Afganastan, Bosnia, and a host of other countries that this is NOT true. If we look at what has happened in the Muslim world in the last thirty years, we can clearly see how globilization can lead to radicalization. Muslims who previously held moderate world views have been exposed to western culture and responded with a resounding ‘no!’. In fact, all around the world groups are promoting there differences despite the constant spread of information.

A corollary to Axelrod’s research is that we can infer how well people from foreign countries will assimilate in our own based upon how closely their culture trends with our own. If they are very different, they are likely to maintain or increase those difference. If they are similar, they are likely to fully integrate. Countries like America, Western Europe, Canada, Australia, New Zealand, and Israel tend to have close enough cultures that intracountry movement in these areas is followed with full integration. Conversely, immigrants from the Muslim world, like the Turkish immigrants in Germany, may never fully accept their new countries culture. Please note, I am not trying to single out muslims. Rather, I simply use this group as an example because of its salient importance in world affairs.

* Why is this true? Well, most people would not agree that it is true at all. However, not only do I believe it is true, but I also believe that we can find corollaries in evolution. What we find is that a species that is initially uniform will begin to speciate even across areas where the spread of genetic material can continue. As natural variations occur, these differences will grow because species will have a preference to mate with those who share similarities – and because they mate with those closest to them. Eventually a new ‘species’ emerges. Clearly the human race, given another few million years would have suffered a similar fate, just as Neanderthals did before us. Of course, this only partially explains how culture works, and it does not explain why globalization would speed the rate of radicalization, only why people might ‘radicalize’ to begin with. One possible intuition is that since people have a preference for those with similar ideas, globalization points out the true magnitude of differences between different groups, and consequently pushes different culture groups farther apart. However, we should remember that culture is a dynamic system that can neither be easily explained nor be easily predicted. Constant flow of information only adds to the complexity of this system.

In my previous blog I examined two types of students, those who pay full bill and those who do not. I proceeded to show that State schools are generally a better investment for wealthier students, financially. All of this reasoning assumed ceteris paribus. Today I want to refine this argument based on the non-financial value of top schools.

When examining the non-financial argument, we have to look at how much utility a person derives from a decision. For example, certain students value the ‘status’ of a top school more than others. Some students find the access to supposedly ‘better’ education rewarding whether or not it provides substantial financial rewards. To simplify this argument, I assume that there is no bias in students preference for non-financial reward based on wealth. Consequently, utility derived from college is constant across the spectrum of the population. The COST of college varies greatly, and it varies percentage wise differently than it varies in absolute numbers. This is important because most economists believe that each additional dollar provides less happiness than the previous dollar. For example, if Bill Gates earns an additional 10,000 dollars in a year, this makes little difference. If a struggling family earns 10,000 additional dollars, this would likely ease their life significantly and provide great utility. The result is that the same quantity of money means a different amount to different people.

A family that earns just enough to pay full bill for college will need to sacrifice a great percentage of their income to send their child to a top school. A really wealthy family, however, will sacrifice very little income percentage wise. Consequently the utility cost of money differs from person to person. However, since the value of college remains the same per person, it is those families who pay a proportionally larger share of income for college that have the greatest incentive to attend a state school. This makes the argument that the ‘middle class’ is hurt the most by college financial policies very true. In order to reduce this affect, the progressivism of college cost would need to be expanded across a much larger income range, and would probably need a higher start point (not zero dollars). Currently both the poor and the very wealthy have the greatest incentive to attend a top school. The upper middle class, the very people that top schools are best a producing, are penalized most.