Via Schneier, we learn a bit more about cleaner fish. I'd heard of these before: little fish that eat parasites off of bigger fish, with both parties being made better off for the exchange. But it's far more interesting than I'd thought.
The cleaner fishes get to choose cooperate (clean parasites) or defect (eat the client fish's tasty skin mucous) for each client. The client fish often leaves if the cleaner chooses defect.
When working alone, male and female cleaners defect against clients about equally. But when cleaner fish work in pairs (male/female), female defection rates drop considerably. If the client leaves because the female defects, the male punishes her by chasing her aggressively, reducing her likelihood of defecting for the next client. Presumably the (smaller) female isn't as able to punish the male for defection. On the whole, average defection rates are lower for partnered cleaners, and clients seek out cleaners that work in pairs.
Here's the rather nice Nature article, October 2008.
And of course recall that Gordon Tullock invented the field of bioeconomics back in 1971.
Tampilkan postingan dengan label Tullock. Tampilkan semua postingan
Tampilkan postingan dengan label Tullock. Tampilkan semua postingan
Rabu, 20 Januari 2010
Minggu, 04 Oktober 2009
Utility enhancing constraints and dairy
In his grad public choice class, Gordon Tullock liked to tell a story from his early career as a State Department official in China, where he was stationed prior to being overrun by the Communists (as best I understand the story).
He said it was common practice for labourers to pull barges up canals using ropes. Another worker would watch over them with a lash, making sure everyone was pulling hard. When he inquired into the practice, he found that the team was paid based on how quickly they would get the barge up the river. None of them, while pulling, could monitor the others to ensure nobody was shirking. And they all knew they'd be tempted to shirk absent a monitor. And so they found it beneficial to assign someone with a whip to watch over the team. The team chose one of their own to stand over them all with a whip, to make sure everyone did his share.
Bernard Hickey today points to more evidence of animal neglect and cruelty in New Zealand's dairy industry. If you go and read the horror stories, be sure to go for the unicorn chaser afterwards.
The Ministry of Agriculture and Fisheries has almost no staff assigned to check into animal welfare complaints. Fonterra, the large dairy cooperative that purchases the vast majority of milk produced in New Zealand, will not get involved in animal welfare cases except where a farmer has been convicted and has not fixed the problem that led to conviction. Of course, since there are almost no animal welfare inspectors, probability of conviction is slim.
Hickey worries that these stories could tarnish New Zealand's dairy image and hurt our position as the largest exporter of the world's traded milk. It's possible. I don't know the probability, but it's possible. Fonterra is residual claimant if New Zealand's dairy industry takes a big hit on this kind of issue. Sometimes, it's worthwhile for a cooperative to designate a whipmaster, and Fonterra seems well placed to take on the job if its shareholders/members want it.
If Fonterra doesn't want to act as whipmaster itself, is there anything that would stop Fonterra from voluntarily paying a levy to the government to fund the hiring of more MAF officers whose sole role would be ensuring animal welfare on Fonterra cooperative farms, then slapping some "animal friendly" stickers on all brands of Fonterra milk? Fonterra's annual turnover is $19.5 billion, with payout to shareholder members of about $9 billion. Would a million or two to equip a team of vets be all that costly in the grand scheme of things? What risk of PR disaster would be sufficient to make the expenditure worthwhile? If there's no impediment to this kind of thing, and Fonterra chooses not to do it, it suggests that Fonterra does not weigh terribly heavily the risks of brand deterioration due to some of its farmer members' rather terrible practices and sees little potential for selling premium "Don't be Evil" product.
Let's hope that Bernard Hickey is successful in making Fonterra deem these kinds of investments worthwhile.
Previous post: animal welfare.
Update: Bernard Hickey's links are broken; try here here here.
He said it was common practice for labourers to pull barges up canals using ropes. Another worker would watch over them with a lash, making sure everyone was pulling hard. When he inquired into the practice, he found that the team was paid based on how quickly they would get the barge up the river. None of them, while pulling, could monitor the others to ensure nobody was shirking. And they all knew they'd be tempted to shirk absent a monitor. And so they found it beneficial to assign someone with a whip to watch over the team. The team chose one of their own to stand over them all with a whip, to make sure everyone did his share.
Bernard Hickey today points to more evidence of animal neglect and cruelty in New Zealand's dairy industry. If you go and read the horror stories, be sure to go for the unicorn chaser afterwards.
The Ministry of Agriculture and Fisheries has almost no staff assigned to check into animal welfare complaints. Fonterra, the large dairy cooperative that purchases the vast majority of milk produced in New Zealand, will not get involved in animal welfare cases except where a farmer has been convicted and has not fixed the problem that led to conviction. Of course, since there are almost no animal welfare inspectors, probability of conviction is slim.
Hickey worries that these stories could tarnish New Zealand's dairy image and hurt our position as the largest exporter of the world's traded milk. It's possible. I don't know the probability, but it's possible. Fonterra is residual claimant if New Zealand's dairy industry takes a big hit on this kind of issue. Sometimes, it's worthwhile for a cooperative to designate a whipmaster, and Fonterra seems well placed to take on the job if its shareholders/members want it.
If Fonterra doesn't want to act as whipmaster itself, is there anything that would stop Fonterra from voluntarily paying a levy to the government to fund the hiring of more MAF officers whose sole role would be ensuring animal welfare on Fonterra cooperative farms, then slapping some "animal friendly" stickers on all brands of Fonterra milk? Fonterra's annual turnover is $19.5 billion, with payout to shareholder members of about $9 billion. Would a million or two to equip a team of vets be all that costly in the grand scheme of things? What risk of PR disaster would be sufficient to make the expenditure worthwhile? If there's no impediment to this kind of thing, and Fonterra chooses not to do it, it suggests that Fonterra does not weigh terribly heavily the risks of brand deterioration due to some of its farmer members' rather terrible practices and sees little potential for selling premium "Don't be Evil" product.
Let's hope that Bernard Hickey is successful in making Fonterra deem these kinds of investments worthwhile.
Previous post: animal welfare.
Update: Bernard Hickey's links are broken; try here here here.
Kamis, 17 September 2009
Transitional gains traps
I'm wrong about this, but I don't know why I'm wrong. I know that I'm wrong
Tullock in 1976 wrote about the Transitional Gains Trap. Suppose that the government puts in place a regulation that confers rents on a few companies. So each of those companies earns an extra $1 million per year, now and forever. The value of the new rental stream has to be capitalized into the price of the fixed asset that draws the rent. And so New York City taxicab medallions, which give their owners the right to run a vehicle as a taxicab, sell for about $750,000. The link is from the homepage of a firm that provides loans to help folks buy taxicab medallions. And in Canada's ridiculous dairy quota management system, the right to milk a cow costs about $25,000. The value of the rent gets capitalized into the asset that's in fixed supply: the permit to run the cab, the right to milk a cow, the land that's eligible for tobacco growing, and so on.
After that capitalization has taken place, the person benefiting from the rental flow is again earning only a normal rate of return on his investment. All of his gain was transitional: the rent-seeker gets a one-off increase in capital value, but no ongoing benefits. Of course, over time, ownership changes; the new owners never enjoyed the transitional gain and earn only a normal rate of return.
Tullock says that, as consequence, reform is well-neigh impossible. While the folks getting the rent are not made better off by it, getting rid of it would impose massive capital losses on them; they'll then lobby up to the expected value of the capital loss to prevent it. And, he says further that there's no way out of it.
The solution seems remarkably simple in principle; since it's not been done, I must be wrong.
For New York Taxis, the City of New York stumps up to buy out all existing medallion holders at a price equal to the average selling price in the quarter prior to folks started talking about a buy-out. They finance this rather large purchase ($750K times about 13,500 licenses = $10 billion) by a bond issue. They then put in place a specific sales tax on taxi rides that leaves the post-change price lower than the prices charged under the medallion system but nevertheless is sufficient to pay off the bond because of reduced deadweight losses and increased numbers of cab rides. The tax expires when the bonds are fully paid off.
The scheme compensates the losers from the change by a tax on the beneficiaries. In the absence of companies that exist solely to facilitate medallion sales, it would be Pareto efficient; instead, it's likely only Kaldor-Hicks. We could imagine some compensation to Medallion Financial Group, though, that would still make the whole thing Pareto.
In the Canadian dairy case, it would be much more complicated because of the way that the Canadian system runs cross-subsidies from "industrial" milk to consumer fluid milk: the tax would have to be on the portions of milk sales that currently earn a premium. Otherwise, it would be similar but would cost a lot more -- best guess, around $25 billion. 978,000 cows * $25,000 per permit.
Think about those numbers. The capitalized value of the rents conferred by the Canadian dairy system and the New York City taxicab system together amount roughly to thirty percent of New Zealand GDP. Ugh.
Ok, so why am I wrong? It looks Pareto to me. What am I missing?
- Because it's never been done and
- Because Tullock says there is no solution
Tullock in 1976 wrote about the Transitional Gains Trap. Suppose that the government puts in place a regulation that confers rents on a few companies. So each of those companies earns an extra $1 million per year, now and forever. The value of the new rental stream has to be capitalized into the price of the fixed asset that draws the rent. And so New York City taxicab medallions, which give their owners the right to run a vehicle as a taxicab, sell for about $750,000. The link is from the homepage of a firm that provides loans to help folks buy taxicab medallions. And in Canada's ridiculous dairy quota management system, the right to milk a cow costs about $25,000. The value of the rent gets capitalized into the asset that's in fixed supply: the permit to run the cab, the right to milk a cow, the land that's eligible for tobacco growing, and so on.
After that capitalization has taken place, the person benefiting from the rental flow is again earning only a normal rate of return on his investment. All of his gain was transitional: the rent-seeker gets a one-off increase in capital value, but no ongoing benefits. Of course, over time, ownership changes; the new owners never enjoyed the transitional gain and earn only a normal rate of return.
Tullock says that, as consequence, reform is well-neigh impossible. While the folks getting the rent are not made better off by it, getting rid of it would impose massive capital losses on them; they'll then lobby up to the expected value of the capital loss to prevent it. And, he says further that there's no way out of it.
The solution seems remarkably simple in principle; since it's not been done, I must be wrong.
For New York Taxis, the City of New York stumps up to buy out all existing medallion holders at a price equal to the average selling price in the quarter prior to folks started talking about a buy-out. They finance this rather large purchase ($750K times about 13,500 licenses = $10 billion) by a bond issue. They then put in place a specific sales tax on taxi rides that leaves the post-change price lower than the prices charged under the medallion system but nevertheless is sufficient to pay off the bond because of reduced deadweight losses and increased numbers of cab rides. The tax expires when the bonds are fully paid off.
The scheme compensates the losers from the change by a tax on the beneficiaries. In the absence of companies that exist solely to facilitate medallion sales, it would be Pareto efficient; instead, it's likely only Kaldor-Hicks. We could imagine some compensation to Medallion Financial Group, though, that would still make the whole thing Pareto.
In the Canadian dairy case, it would be much more complicated because of the way that the Canadian system runs cross-subsidies from "industrial" milk to consumer fluid milk: the tax would have to be on the portions of milk sales that currently earn a premium. Otherwise, it would be similar but would cost a lot more -- best guess, around $25 billion. 978,000 cows * $25,000 per permit.
Think about those numbers. The capitalized value of the rents conferred by the Canadian dairy system and the New York City taxicab system together amount roughly to thirty percent of New Zealand GDP. Ugh.
Ok, so why am I wrong? It looks Pareto to me. What am I missing?
Minggu, 16 Agustus 2009
Hoisted from the comments: for a Hayekian game
Commenter Max Marty writes:
A more interesting variant could work something like the following. You're the city comptroller. You've been appointed by the newly-elected mayor to sort out the mess that the city's in. He was elected on a reform platform, but he's worried that if he goes too far, he'll be turfed in the next election and he's more than happy to make you scapegoat if necessary. You get polling data on which issues the public thinks are currently most important and reactions to your latest policy moves. All of the economics works as it should, but implementing optimal policy too quickly could see you turfed from office. So, if voters think education is important, you might still find that a move to eliminate zoning and turn the public schools into charter schools would yield protests and strikes by the teachers' unions (still protected by State-level union rules so you can't just fire the lot of them) and protests by folks who would suffer large losses to property values with the eliminations of restrictive zoning (rich folks basically). What small moves can you make to build support towards optimal policy? How many compromises on other margins are you willing to accept to make small changes on the more important margin?
Or, if folks are upset about the high costs of taxicabs, you might find that eliminating taxicab licensing (restrictions on entry: the New York Medallion system) would dramatically reduce fares but also would yield gridlock as cab owners protested by blocking key intersections and a wave of voter opposition as a poor immigrant who invested his life savings to buy a taxicab medallion, which he planned on passing on to his son, talks about how the reforms would bankrupt him. Can you devise a policy that compensates the losers but remains popular with voters? Tullock says no, but I still think a buy-out of medallion holders financed by a bond issue that's paid off using a tax on taxi fares would be a Pareto move. I'm almost surely wrong though, because there are no Pareto moves left in politics (== $20 on the sidewalk) and because Tullock says there's no system that would work. I just don't know why it wouldn't work.
Add in machinations of the challenger for office and some incentives to implement policies that induce his supporters to leave town: the Curley Effect.
Then add in random swings in voter opinion based on whether the local TV station aired an expose on the free coffee city workers get in their lunchrooms or whether Barry White has just sung a song about how the city should eliminate whacking day.
The game sounds depressing. And frustrating. And is sufficient reason never to run for public office.
I've often wished for a Simcity-ish simulation that operated on actual market principles. I even tried getting a copy of a simulation called "Capitalism" but its just a different flavor of micro-management at the agent level.I've wondered what a Hayekian Sim City game would look like. If you start ground up with a new city, like Sim City, the game would be trivial: just set an optimal rule structure at the start and make sure there's an insurance market against Godzilla attacks.
Alright, who wants to start a Hayekian inspired game company with me?
A more interesting variant could work something like the following. You're the city comptroller. You've been appointed by the newly-elected mayor to sort out the mess that the city's in. He was elected on a reform platform, but he's worried that if he goes too far, he'll be turfed in the next election and he's more than happy to make you scapegoat if necessary. You get polling data on which issues the public thinks are currently most important and reactions to your latest policy moves. All of the economics works as it should, but implementing optimal policy too quickly could see you turfed from office. So, if voters think education is important, you might still find that a move to eliminate zoning and turn the public schools into charter schools would yield protests and strikes by the teachers' unions (still protected by State-level union rules so you can't just fire the lot of them) and protests by folks who would suffer large losses to property values with the eliminations of restrictive zoning (rich folks basically). What small moves can you make to build support towards optimal policy? How many compromises on other margins are you willing to accept to make small changes on the more important margin?
Or, if folks are upset about the high costs of taxicabs, you might find that eliminating taxicab licensing (restrictions on entry: the New York Medallion system) would dramatically reduce fares but also would yield gridlock as cab owners protested by blocking key intersections and a wave of voter opposition as a poor immigrant who invested his life savings to buy a taxicab medallion, which he planned on passing on to his son, talks about how the reforms would bankrupt him. Can you devise a policy that compensates the losers but remains popular with voters? Tullock says no, but I still think a buy-out of medallion holders financed by a bond issue that's paid off using a tax on taxi fares would be a Pareto move. I'm almost surely wrong though, because there are no Pareto moves left in politics (== $20 on the sidewalk) and because Tullock says there's no system that would work. I just don't know why it wouldn't work.
Add in machinations of the challenger for office and some incentives to implement policies that induce his supporters to leave town: the Curley Effect.
Then add in random swings in voter opinion based on whether the local TV station aired an expose on the free coffee city workers get in their lunchrooms or whether Barry White has just sung a song about how the city should eliminate whacking day.
The game sounds depressing. And frustrating. And is sufficient reason never to run for public office.
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