A couple years ago NPR's Planet Money podcast had an episode about Somali pirates. (The pirate part starts at 9:35). There was all sorts of interesting stuff about division of labor, allocation of shares, pirate venture capital, etc. Some of this paralleled early modern piracy (as given a scholarly analysis in Peter Leeson's work and a romantic perspective in innumerable books and movies since Treasure Island) but in other respects it's very different. In particular, whereas early modern piracy was mostly about seizing cargo and the crews were left alone if they surrendered promptly, Somali piracy is more similar to piracy in antiquity in that it's basically maritime kidnapping. The typical instance of Somali piracy isn't that different from what a young Julius Caesar experienced when he was kidnapped by pirates and held for ransom on his way home from political exile in Asia Minor. One interesting detail in Plutarch's report is that, "When these men at first demanded of him twenty talents for his ransom, he laughed at them for not understanding the value of their prisoner, and voluntarily engaged to give them fifty."
It's not entirely clear if we should take Plutarch's report at face value (he also tells us that Caesar constantly insulted his captors as being, for instance, too uncivilized to appreciate his poetry) but for the sake of argument let's accept that Caesar rather brashly gave away too much information in the game of price discovery. According to a hostage negotiator quoted by This American Life, giving away this information is apparently typical of hostages and is counter-productive to their release as it narrows the bid-ask spread. Economists would describe hostage negotiation as a bilateral monopoly price negotiation that is structurally just a special case of chicken. That is, unlike a barrel of oil or a freight car full of soybeans which can trade on an extremely liquid market with innumerable buyers and sellers, a hostage has exactly one seller (the kidnappers) and exactly one buyer (the employer and/or family of the hostage). When there is only one buyer, the opportunity cost for ransoming the hostage is zero. Likewise, the employer and/or family has no realistic alternative means to recover the hostage. In order for everybody to walk away happy, we need a cooperate-cooperate outcome: the kidnapper has to give up the hostage and the employer/family has to give up a ransom. This structure also characterizes art theft, which in practice is not a matter of fencing art on the black market but ransoming art to a museum's insurance company.
If we model a bilateral monopoly negotiation only two things should matter. The first is, as always in a game of chicken, the willingness to accept failure. The more willing you appear to walk away, the more bargaining power you have. In a more protracted game this can cash out as willingness to delay which we can treat as a defect-defect outcome on the installment plan. In fact in the Planet Money episode on Somali piracy, the hostage's party did balk and break off negotiations for weeks at a time until the pirates were willing to come down on price.
The other thing that should matter is the capacity to pay. If the pirate knows for an absolute fact that the hostage's people simply can't raise more than a million dollars then it would be pointless for them to demand two million dollars. Of course there is an issue of information asymmetry in that the hostage's party has much better information on its assets than do the pirates and so the pirates may be skeptical of the hostage's party pleading poverty (especially if the hostage has foolishly told them how much money they can get). We see this at work in the TAL story's point that kidnapping insurance holds the condition that you can't tell anyone you have kidnapping insurance.
Here's something that the econ model tells us shouldn't matter: the going rate. In normal markets the going rate matters, but only because it provides the opportunities for substitutes and this creates the "law of one price." For instance, when I go to a grocery store and see a loaf of bread for $4 I won't buy it. An economist would say I forgo this purchase because I know perfectly well that the going rate for a loaf of bread is about $2.25 and so I can go elsewhere and get bread cheaper. Similarly if I go to the Honda dealer to buy a Honda Accord, it is relevant for me to mention price quotes offered by other Honda dealers for an Accord or even how much Toyota dealers ask for a Camry because it is entirely credible that I'll walk off the lot and go to rival car dealers offering very close substitutes for this dealer's cars. However if my sister is locked in a basement in Ciudad Juarez and the kidnappers can credibly commit to not letting her go unless I raise $x, it is completely irrelevant that in the past kidnappers accepted ransoms of $x/2 since I don't have the relatively good fortune of dealing with a kidnapper who demands $x/2 but am stuck with one who demands $x. There are no other places where I can buy the freedom of my sister and so the only price that matters is the one being demanded by her particular kidnappers. (Note to any cartels reading this: I don't have a sister).
And nonetheless, much like how most people who haven't studied statistics balk at the idea that the ratio of sample size to population size is irrelevant to statistical inference, people seem to have a strong intuition that the "market price" is relevant to a bilateral monopoly even though the whole idea of a bilateral monopoly is that there is not really a market but only a series of discrete one-off transactions. In the absence of substitutability, "comparable" transactions are irrelevant as they don't imply opportunity cost. This is the main thing I found so fascinating about the Planet Money episode, over and over again the hostage's party balked at the pirates demands as unreasonable in being out of line with the "market price." We only get the pirates' story second hand, but apparently at no point did they explain to the hostage's party that "market price" doesn't really exist in a bilateral monopoly. (Maybe Mogadishu University needs a better econ department).
There are two ways, which are only partially incompatible, to look at why people insist that there is a market price. The simple model is to see us as making Bayesian inferences about the price the other party is willing to accept. If a pirate asks me for $10 million when I know that previous ransoms for similar hostages from similar pirates were about $1 million, I face two possibilities. It may be that I'm facing an usually greedy or unreasonable pirate and $10 million really is the price from which he will not budge. However it seems more likely that I'm dealing with a regular pirate, who like most pirates in the past will ultimately settle for about $1 million but who is just floating a high initial figure in case I'm especially bad at this. In this sense the distribution of prices for similar transactions may not be directly relevant in the sense of providing opportunities for substitution (or the credible threat to avail myself of them) but it is still relevant as information about the zone of possible agreement. This is consistent with the Planet Money story in that Filipinos are cheaper to ransom than Europeans by an order of magnitude. Presumably this reflects Bayesian inference on the part of the pirates from the hostage's nationality as to how much the hostage's party should be able to raise. Alternately we could imagine that pirates always start with the same bargaining position but the Filipinos are less able to pay and so the pirates eventually reach this through ad hoc price discovery on a case-by-case basis. This strikes me as implausible though and I think pirates probably learned pretty quickly what they can reasonably expect for each nationality.
This is a nice explanation and it has the appeal of bending but not breaking the economic model of the actor, but it's not clear how seriously we want to take it and even if it's ultimately true it may not reflect the subjective experience. For instance, one of the main explanations for racial discrimination is that it reflects Bayesian inference about aspects of human capital that aren't readily observable. This model was devastated by Devah Pager's audit study showing that employers prefer to hire white men with a criminal record rather than black men without a criminal record, whereas the "statistical discrimination" model predicts that ascriptive discrimination should be weaker than and diminish greatly in the presence of information about relevant traits at the individual level. In the wake of the Pager study the best case you can make for the statistical discrimination model is that our intuitions are Bayesian in the aggregate but are too low level for us to override with directly relevant information (or, for that matter, with the conscious desire to avoid stereotyping on legal or ethical grounds). It's not unlike the argument that evolution made sex feel good so that we will propagate our genes, but it still feels good when you use birth control. So we might prefer a model that is ultimately consistent with people using prevailing price as information in bilateral monopoly negotiations, but is proximately and subjectively more about meaning.
Although the discipline of economics has many valuable things to teach us about how markets work, especially in the long-run, the subjective experience of someone bargaining does not necessarily reflect thinking through how a rational actor would apply price theory (competitive markets) or game theory (monopolistic markets) to the situation. Rather people take moralized approaches to exchange and seem to apply various relational models to exchange, which includes not only market exchange but also gift exchange, patron-client ties, and primitive communism. Moreover, even when people accept that a situation is one of market exchange it does not come naturally to think of price like modern economists think of it, as "market clearing." Rather much as people intuitively expect physical objects to behave by Buridan's impetus rather than Newton's inertia, people's intuitive notions about price can have less to do with how economics thinks of it than how Aristotle, Aquinas, and Marx thought of it, as "just price" or "fair price." We see the Aristotelian/scholastic/Marxist understanding of price institutionalized in price controls and laws against gouging. The intuition many people seem to feel is that the long-run prevailing price has moral weight and deviations from this price (as for instance in a supply or demand shock leading to "gouging") are immoral. Hence historical bread riots often involve not exactly stealing food but rather mobs enacting vigilante price controls. Most recently we saw this is in a class action lawsuit against concession prices in movie theaters. As an American and someone who studies exchange professionally, economics comes naturally enough to me that my immediate reflex to this story is to think this guy needs to understand two-part tariffs and tell him if he doesn't like the theater's prices nobody is forcing him to go there or to eat once he arrives. However the fact that somebody felt sufficiently indignant to sue over being offered the opportunity to buy a bucket of popcorn for $6 shows us that the perspective assumed by academic economics doesn't necessarily come naturally to people. Similarly, when the hostage's party is negotiating a ransom with pirates both the pirates and hostages may be behaving in ways that are ultimately consistent with a game of chicken under conditions of bounded rationality and Bayesian inference about asymmetric information, but in the immediate subjective sense they may simply be feeling that the recent run of ransoms sets an expectation of what it is fair to pay for this particular hostage.
Oh, and one more thing about Caesar. Plutarch tells us that after he was ransomed he got some ships, raided the pirates, and had them all crucified.
Cultural anthropology can help explain why the downturn caught everyone by surprise: Experts around the world tend to focus on the same mathematical models, looking for patterns in the same limited number of places.
In the name of emotional well-being, college students are increasingly demanding protection from words and ideas they don’t like. Here’s why that’s disastrous for education—and mental health.
Something strange is happening at America’s colleges and universities. A movement is arising, undirected and driven largely by students, to scrub campuses clean of words, ideas, and subjects that might cause discomfort or give offense. Last December, Jeannie Suk wrote in an online article for The New Yorker about law students asking her fellow professors at Harvard not to teach rape law—or, in one case, even use the word violate (as in “that violates the law”) lest it cause students distress. In February, Laura Kipnis, a professor at Northwestern University, wrote an essay in The Chronicle of Higher Education describing a new campus politics of sexual paranoia—and was then subjected to a long investigation after students who were offended by the article and by a tweet she’d sent filed Title IX complaints against her. In June, a professor protecting himself with a pseudonym wrote an essay for Vox describing how gingerly he now has to teach. “I’m a Liberal Professor, and My Liberal Students Terrify Me,” the headline said. A number of popular comedians, including Chris Rock, have stopped performing on college campuses (see Caitlin Flanagan’s article in this month’s issue). Jerry Seinfeld and Bill Maher have publicly condemned the oversensitivity of college students, saying too many of them can’t take a joke.
Though it wasn’t pretty, Minaj was really teaching a lesson in civility.
Nicki Minaj didn’t, in the end, say much to Miley Cyrus at all. If you only read the comments that lit up the Internet at last night’s MTV Video Music Awards, you might think she was kidding, or got cut off, when she “called out” the former Disney star who was hosting: “And now, back to this bitch that had a lot to say about me the other day in the press. Miley, what’s good?”
To summarize: When Minaj’s “Anaconda” won the award for Best Hip-Hop Video, she took to the stage in a slow shuffle, shook her booty with presenter Rebel Wilson, and then gave an acceptance speech in which she switched vocal personas as amusingly as she does in her best raps—street-preacher-like when telling women “don’t you be out here depending on these little snotty-nosed boys”; sweetness and light when thanking her fans and pastor. Then a wave of nausea seemed to come over her, and she turned her gaze toward Cyrus. To me, the look on her face, not the words that she said, was the news of the night:
The NBC show isn’t casting its net wide enough when it comes to finding new players.
Since the departure of many of its biggest stars two years ago, Saturday Night Live has mostly avoided major cast changes. Yesterday, NBC announced the show would add only one new cast member for its 41st season—the near-unknown stand-up comic Jon Rudnitsky. SNL is, of course, a sketch-comedy show, but it keeps hiring mostly white stand-ups who have a markedly different skill set, with limited results. As critics and viewers keep calling out for greater diversity on the show, it’s hard to imagine the series’s reasoning in sticking to old habits.
As is unfortunately typical today, controversy has already arisen over some tasteless old jokes from Rudnitsky’s Twitter and Vine feeds, similar to the furore that greeted Trevor Noah’s hiring at The Daily Show this summer. But Rudnitsky was apparently hired on the back of his stand-up performances, not his Internet presence, similar to the other young stand-ups the show has hired in recent years: Pete Davidson, Brooks Wheelan (since fired), and Michael Che. It’s a peculiar route to the show, because SNL is 90 percent sketch acting, and unless you’re hosting Weekend Update (like Che), you’re not going to do a lot of stand-up material. So why hire Rudnitsky?
Why haven’t more challengers entered the race to defeat the Iraq War hawk, Patriot Act supporter, and close friend of big finance?
As Hillary Clinton loses ground to Bernie Sanders in Iowa, where her lead shrinks by the day, it’s worth noticing that she has never made particular sense as the Democratic Party’s nominee. She may be more electable than her social-democratic rival from Vermont, but plenty of Democrats are better positioned to represent the center-left coalition. Why have they let the former secretary of state keep them out of the race? If Clinton makes it to the general election, I understand why most Democrats will support her. She shares their views on issues as varied as preserving Obamacare, abortion rights, extending legal status to undocumented workers, strengthening labor unions, and imposing a carbon tax to slow climate change.
Many educators are introducing meditation into the classroom as a means of improving kids’ attention and emotional regulation.
A five-minute walk from the rickety, raised track that carries the 5 train through the Bronx, the English teacher Argos Gonzalez balanced a rounded metal bowl on an outstretched palm. His class—a mix of black and Hispanic students in their late teens, most of whom live in one of the poorest districts in New York City—by now were used to the sight of this unusual object: a Tibetan meditation bell.
“Today we’re going to talk about mindfulness of emotion,” Gonzalez said with a hint of a Venezuelan accent. “You guys remember what mindfulness is?” Met with quiet stares, Gonzalez gestured to one of the posters pasted at the back of the classroom, where the students a few weeks earlier had brainstormed terms describing the meaning of “mindfulness.” There were some tentative mumblings: “being focused,” “being aware of our surroundings.”
Beijing’s top five scapegoats, from journalists to hedge funds to the U.S. federal reserve
China’s stock markets continue to stumble, despite the massive stimulus that the government has unleashed to prop them up. The Shanghai benchmark index fell by 1.23 percent Tuesday, after closing down slightly Monday. The index has fallen by nearly 40 percent from its mid-June peak.
In some ways, the slide isn’t surprising—after all, Chinese stocks were trading at extremely rich valuations before they started to fall, even as signs emerged that China’s economy was slowing.
When cobbling together a livable income, many of America’s poorest people rely on the stipends they receive for donating plasma.
There is no money to be made selling blood anymore. It can, however, pay off to sell plasma, a component in blood that is used in a number of treatments for serious illnesses. It is legal to “donate” plasma up to two times a week, for which a bank will pay around $30 each time. Selling plasma is so common among America’s extremely poor that it can be thought of as their lifeblood.
But no one could reasonably think of a twice-weekly plasma donation as a job. It’s a survival strategy, one of many operating well outside the low-wage job market.
In Johnson City, Tennessee, we met a 21-year-old who donates plasma as often as 10 times a month—as frequently as the law allows. (The terms of our research prevent us from revealing her identity.) She is able to donate only when her husband has time to keep an eye on their two young daughters. When we met him in February, he could do that pretty frequently because he’d been out of work since the beginning of December, when McDonald’s reduced his hours to zero in response to slow foot traffic. Six months ago, walking his wife to the plasma clinic and back, kids in tow, was the most important job he had.
After calling his intellectual opponents treasonous, and allegedly exaggerating his credentials, a controversial law professor resigns from the United States Military Academy.
On Monday, West Point law professor William C. Bradford resigned after The Guardianreported that he had allegedly inflated his academic credentials. Bradford made headlines last week, when the editors of the National Security Law Journaldenounced a controversial article by him in their own summer issue:
As the incoming Editorial Board, we want to address concerns regarding Mr. Bradford’s contention that some scholars in legal academia could be considered as constituting a fifth column in the war against terror; his interpretation is that those scholars could be targeted as unlawful combatants. The substance of Mr. Bradford’s article cannot fairly be considered apart from the egregious breach of professional decorum that it exhibits. We cannot “unpublish” it, of course, but we can and do acknowledge that the article was not presentable for publication when we published it, and that we therefore repudiate it with sincere apologies to our readers.
If the Fourteenth Amendment means that the children of undocumented immigrants are not citizens, as Donald Trump suggests, then they are also not subject to American laws.
Imagine the moon rising majestically over the Tonto National Forest, highlighting the stark desert scenery along the Superstition Freeway just west of Morristown, Arizona. The sheriff of Maricopa County sips coffee from his thermos and checks that his radar gun is on the ready. A lot of lawmen wouldn’t have bothered to send officers out at night on such a lonely stretch of road, much less taken the night shift themselves. But America’s Toughest Sheriff sets a good example for his deputies. As long as he’s the sheriff, at least, the rule of law—and the original intent of the Constitution—will be enforced by the working end of a nightstick.
Suddenly a car rockets by, going 100 miles an hour by the gun. Siren ululating, the sheriff heads west after the speeder. The blue Corolla smoothly pulls over to the shoulder. The sheriff sees the driver’s side window roll down. Cautiously he approaches.
Every time you shrug, you don’t need to Google, then copy, then paste.
Updated, 2:20 p.m.
All hail ¯\_(ツ)_/¯.
In its 11 strokes, the symbol encapsulates what it’s like to be an individual on the Internet. With raised arms and a half-turned smile, it exudes the melancholia, the malaise, the acceptance, and (finally) the embrace of knowing that something’s wrong on the Internet and you can’t do anything about it.
As Kyle Chayka writes in a new history of the symbol at The Awl, the meaning of the “the shruggie” is always two, if not three- or four-, fold. ¯\_(ツ)_/¯ represents nihilism, “bemused resignation,” and “a Zen-like tool to accept the chaos of universe.” It is Sisyphus in unicode. I use it at least 10 times a day.
For a long time, however, I used it with some difficulty. Unlike better-known emoticons like :) or ;), ¯\_(ツ)_/¯ borrows characters from the Japanese syllabary called katakana. That makes it a kaomoji, a Japanese emoticon; it also makes it, on Western alphabetical keyboards at least, very hard to type. But then I found a solution, and it saves me having to google “smiley sideways shrug” every time I want to quickly rail at the world’s inherent lack of meaning.