miscellaneous factZ

I’ve now posted my slides from the Musicans, Fans and Online Copyright event which took place last Wednesday at LSE. They can be found on this site:

http://rufuspollock.org/economics/papers/musicians_fans_and_online_copyright_20080319/

For anyone with an interest in copyright issues, particularly in the online environment, there is an excellent event on today at the LSE organized by Ian Brown of the OII and at which I’ll be speaking (briefly) on the subject of “How can we maximise copyright’s return to society?” More details below.

Musicians, fans and online copyright

Wednesday 19 March 2008 14:00 - 17:00

• John Kennedy, CEO of IFPI
• Paul Sanders, Director of Strategy at Playlouder
• Becky Hogge, Open Rights Group
• Adrian Brazier, DBERR
• Lilian Edwards, Southampton University
• Rufus Pollock, Cambridge University
• Michelle Childs, Knowledge Ecology International
• Wendy Grossman, musician / freelance journalist

Location: Old Theatre, London School of Economics, Houghton Street, London, WC2A 2AE, United Kingdom.

This Wednesday afternoon we have a great selection of speakers for our free OII/LSE event on music and copyright. Come along to find out what the government, music industry, publishers and independent experts are thinking about ideas like 3-strikes-and-you’re-disconnected; scanning ISP traffic for copyright works; and notice and takedown regimes.

Full programme at: http://www.oii.ox.ac.uk/events/details.cfm?id=186

Following on from the second workshop a month ago, today saw the third in the series of “Workshops on Well-being” take place at the LSE. This time the presentation was given by Andrew Clark of PSE. Below are some (very) impressionistic notes.

Presentation by Andrew Clark on Job Satisfaction: What do we Know and What Next?

1. Job satisfaction (JS) and individual well-being (LS)

   • well-being/LS function LS = f(Job satisfaction, health satisfaction, leisure etc)
   • data in BHPS (waves 6-15 though 11 missing)
   • health/ income / house / spouse / job / social life / amout leisure / use leisure (scale 1-7)
   • all highly significant
   • social life is top, followed by health, use of leisure, income and job satisfaction is last
   • robust to demographic controls
   • But do individual personality types make any difference (fixed effects)

2. Panel results

   • all effects go down (there are ‘happy types’) except JS (which doubles) though still the smallest
   • Is this ranking unique to Britain?
   • Is it the same for everyone? (subregressions: old/young, men/women; or do a latent class analysis)

3. JS is important to firms as well as it will predict worker behaviour

   • Labour turnover
   • Absenteeism
   • Counter-and non-productive work/productivity
   • Worker quitting (but almost impossible to do properly as quitting is self-reported so unreliable)
   • P(quit(t+1)) = f(JS, X(t))

4. Compare quitting GB and Germany

   • pretty similar, JS is pretty significant

5. Cognitive biases and context in relation to quitting (SPELL data from BHPS)

   • have panel data so can look at series of JS for an individual
   • refers to Kahnemann and Riedelmeier on evaluation of colonoscopy
   • suggest Peak-End evaluation: evaluations of peak and end point
   • Apply to job quitting (peak-end, min, max, avg, current …)
   • peak-end does best (followed by running max (close), and current)
   • => behaviour would not then seem to max their utility

6. Try do the same with income but need variations in income (since normally just rises)

   • use truckers as they have exog changes
   • other potential sources: tax changes
   • peak-end divorce

7. Relative income

   • Traditional: W/LS/JS = W(y,…)
   • Comparisons: LS/JS = W(y/yr, …)
   • yr is comparison/relative income
   • to whom do we compare? (peers, others in HH, spouse, myself in the past, friends, neighbours, work, expectations)
   • Results:
   • +ve effect of income
   • But falling as other’s income rises
   • Overall effect is zero: if everyone’s income rises then no effect

8. Preference for structure of income

   • same income but in different ways
   • flat slope (A), steeper (+ve) slope (B), and v. +ve slope (C)
   • even though flat slope (using saving to mimic C) would result in being overall better off
   • asked about this (they were told they could this) they still chose C (apparently because of self-control issues — they wouldn’t be able to save)

9. Does other’s income always affect one negatively

   • Hirschmann’s tunnel effect (happy for something good for you because it means something good is going to happen to me)
   • Danish ECHP (1994-2001): fantastic data (which gave not only individuals but all of their colleage’s info including pay)
   • here one does find a +ve effect of others income on me (check how it varies across firm so not just selection effect at firm level)

10. Do 2 wrongs make a right?

    • Peak-end utility could be thought of as ‘correct’ as:
    • with adaptation
    • current utility (after something good) understates actual total flow benefits (as one has adapted)
    • PE corrects for this

11. Instrumental uses of JS

    • ‘Good job’ lit has mainly focused on money
    • But self-employed earn less but are happier (though significat issues about reporting bias)
    • Also why are there different avg. wages in different industries (when they look the same)
    • Compensating differentials vs. rents
    • So let’s use JS to explain different
    • looking at the data: high wage goes with high JS (so suggests this about rents not compensation)

12. Job Quality: Are things going to the dogs?

    • ISSP (repeated XS in 3 waves 1989 - 2005)
    • Multivariate regressions: JS is improving (went down 1989-1997 but bounced back in 2005)
    • But stressful/dangerous/difficult work has been rising
    • Good job content has been going down.
    • However enough other stuff has been getting better faster (income, opportunities, flexible hours)

Discussion

• Paul Dolan:
  • Causality
  • Experienced Utility? Kahnemann would be unhappy
  • Peak-end seems difficult for JS since already a retro-spective evaluation (so peak-end of a peak-end)
• Gordan:
  • relative ranked position not just compared to the avg
  • care more about those above than those below
  • need to be more specific about form of relativities
• All: Context, Context, Context
• RP: Peak-end vs. range-frequency. Take colonoscopy: PE predicts that increasing pain at a single point (early on) would worsen evaluation while range-frequence would predict it would improve evaluation (since you spend more time at a level relatively better than the worst)
• BHPS: now have a question asking for whether your LS is better/worse than last year
• Gordan: gratitude is single biggest predictor of happiness
  • individual differences
• Propensities to adapt
• Gordon: Andrew Oswald and he also found +ve avg income effects in workplace
• Judgment vs. Adaptation
• Paul Dolan: generally we overestimate our +ve attributes but underestimate (their relative) income level

The research report entitled Models of Public Sector Information Provision via Trading Funds was published today to coincide with its mention in the budget (para 3.49). This report was commissioned by HMT and BERR and jointly written by myself, Professor Newbery and Professor Bently (all at Cambridge University).

The formal announcement and details of the context in which the report was commissioned can be found here on BERR’s website. To quote at some length from the section dealing with this report:

As part of the response [to the OFT’s report on the Commercial Use of Public Information], the Government commissioned Cambridge University to do some analysis specifically around the pricing of public sector information held by trading funds[i].

This analysis has been released today as a Study Report (11 March 2008 - see Related Documents), and it sets out estimates of the costs and benefits of marginal-cost pricing, based on the assumptions used by the Cambridge team and the data they were able to collect.

Going forward, the Government will look closely at the public sector information held by trading funds to distinguish more clearly what is required by Government for public tasks, ensuring this information is made available as widely as possible for use in actual and potential downstream markets.

In the lead up to the next spending review, it will also ensure that it is priced appropriately. The underlying principle will be that information collected for public purposes will be made available at a price that balances the need for access while ensuring customers pay a fair contribution to the cost of collecting this information in the long-term.

[i] The study was commissioned jointly by the Department for Business, Enterprise and Regulatory Reform and HM Treasury in July 2007. The terms of reference for the study are available upon request by contacting the BERR Enquiry Unit

Meanwhile the budget had this to say (chapter 3 and chapter 5)

3.49 [Commercial Use of Public Sector Information] The Office of Fair Trading’s (OFT) market study into the commercial use of public information15 highlighted important issues around access to public sector information for commercial or other re-use. The Government commissioned Cambridge University to analyse the pricing of this information. This analysis is published alongside Budget 2008. The Government will look closely at public sector information held by trading funds to distinguish more clearly what is required by Government for public tasks and ensure that this information is made available as widely as possible for use in downstream markets. In the lead up to the next Spending Review the Government will ensure that information collected for public purposes is priced so that the need for access is balanced with ensuring that customers pay a fair contribution to the cost of collecting this information in the long term. These issues will be considered in conjunction with the assessment of trading funds (see Chapter 5).

….

5.14 [Asset management and sales] The Government is committed to managing the stock of public assets to deliver optimal results for society and the economy. Following the 2007 CSR, departments are publishing asset management strategies setting out how they will deliver best value from their assets. To support the introduction of asset management strategies the Treasury and Shareholder Executive will undertake an assessment of the governance, business plans and future development strategies of each of the trading funds and a selection of public corporations (excluding those already subject to central government review).

Following the first workshop a month ago, today I attended the second of a series of “Workshops on Well-being” at the LSE. Below are some (very) impressionistic notes.

Presentation by Paul Dolan and Robert Metcalfe: Valuing non-market Goods: Preference based and experience based methods

1. How do Value non-market goods?

   • Preferences
   • revealed (observed market behaviour)
   • stated (contingent hypothetical market)
   • Experiences: subjective well-being
   • Traditionally (implicitly) assume all of these are equivalent

2. urban renewal in swansea (from 2001)

   • 2 areas: hafod and landore
   • hafod has had renewal (500/950 homes)
   • landore (675) has not
   • compare the two (omitting those who have not yet had renewal and in-movers)

3. Improvements:

   • front boundary walls
   • street lighting
   • etc
   • landore: house cost 95k, income 16k
   • hafod

4. Estimate revealed preferences using land-registry data and dummy for renewal.

5. WTP: card they fill in saying what they are willing to pay for various improvements (per month for 3 years).

6. “Thinking about your life and personal circumstances, how satisfied are you with your life as a whole?”

7. 364 out of 1625 (22.4%) response rate (low but representative)

   • slightly biased to renewal area

8. Revealed prefs: no effect on prices of renewal (and apparently this had also been found in a much larger

9. WTP: £750 over 3 years (£250 a year)

10. 6.5% increase in life satisfaction (7.1 to 7.7 on a 10 point scale)

    • controlling for marital status, age, gender, income etc
    • approx 19k in monetary terms
    • but problems of endogeneity of income
    • instrument using partner in employment and rented accommodation well-being hit now is £6350
    • cost of renewal was ~14k

11. 2nd experiment: renewal in Port Talbot but not Neath

    • 8k for improvements + £250 for home safety per household
    • WTP: £500 (over 3 years)
    • SWB: 12.5k
    • but 2.5k for repair and 10k for safety!
    • income instrumented by WTP

12. What explains the discrepancy?

    • revealed preference may be wrong because of unobserved effects (e.g. improvements in Hafod).
    • WTP: evidence that per month/year figures would just go on forever (even though told just for 3 years).
    • SWB Income Compensation: might be discounted PV of long-term benefits.
    • WTP accumulate over 12-20 years (average time people are in the house) or discounted SWB IC over 25 years results in WTP value = SWB IC value.

A refactoring of the first theoretical part of my optimal copyright paper has now been published in the December issue of the Review of Economic Research on Copyright Issues (RERCI) under the title: Optimal Copyright over Time: Technological Change and the Stock of Works. A preprint can be found at:

http://www.rufuspollock.org/economics/papers/optimal_copyright_over_time.pdf

Courtesy or a kind invitation from Richard Cave, tomorrow I’ll be heading over to Warwick University to present in their IO Seminar. The talk will be focused on my main ‘IP papers’: Cumulative Innovation, Sampling and the Hold-Up Problem and Imitation and Innovation with and without IP, but if there’s time I might also get the chance to discuss another paper of mine on the Control of Porting in Two-Sided Markets.

Yesterday I attended the first of a series of “Workshops on Well-being” at the LSE organized by Paul Dolan, Richard Layard and Andrew Oswald. Below can be found some (very) impressionistic notes.

Talk by Andrew Oswald: Does Higher Job-Status Make a Person Healthier? A Longitudinal Test of the Whitehall Hypothesis

Basic (well-known) facts:

• Strong inverted u-shape in depression/anxiety over life-cycle peaking in mid-40s to mid-50s
• Need to move away from GDP to well-being in the next century
• More collaboration across discipline
• Across countries wealth correlated with happiness
• Within country across time (i.e. repeated cross-sections) no real growth in happiness (though growth in money)
• Now have data for Britain, Belgium and Netherlands and we reject null of no change in GHQ over time (so there is a decline in mental health over time).
• Can repeat across EU countries.

New social welfare functions:

• blood pressure, obesity, height.
• Life Satisfaction (LS) from NCDS: LS=f(high blood pressure, personal controls). high blood pressure enters negative.
• Well-being and height (guided by John Komlos)
  • danes and netherlands have been getting taller faster than anyone else (in US it may even be going down recently i.e. since ~1990)
  • this is interesting because danes and nthlands are happiest (and US is pretty unhappy)
  • height and happiness are correlated in rich EU countries (this still holds with deltas of height and happiness)
• Weight and well-being
  • BMI enters negatively in regressions for LS, Happiness, well-being (GHQ)
  • Christakis and Fowler The spread of obesity in a large social network over 32 years. NEJM 2007
  • Summarizes his paper on BMI with Powdthavee (where relative effects are significant)
  • u is concave in relative position then upward spirals, convexity then deviate from herd.
  • Relative BMI enters negatively (along with absolute BMI)
  • Carol Graham on US and Russians

Status and well-being.

• Look at the ‘Whitehall effect’ using longitudinal data. Contrary to existing cross-sectional results finding a robust effect they do not find such a result. This suggests that cross-section results may be picking up causality the other way and the resulting selection effect (people who are healthier get promoted).
• Redelmeier and Singh, Annals of Internal Medicine (Oscar winners live longer). But lot of issues statistically (not enough controls)
• Rablen and Oswald (2006), look at Nobel prize winners (vs. nominees). Get 1.6 extra years.
• Final aside: did experiment looking at reporting function on height. Found perceived height was linearly related to actual height.

Discussion

Paul Dolan

• When do we compare?
• Inequalities (higher moments …)
• Mental health and well-being (v. blurred distinction)
• International comparisons (are they useful)
• What measures if we move away from GDP?

Misc

• Range frequency theory
  • Parducci etc
• How happy they are with weight
  • Actual weight vs. actual weight
• Gilevich study
  • won a medal. Silver medallists less happy than bronze medallists.
• Increase in reports of morbidity but less actual illness.

Own questions

QU: if we’re hoping for a reorientation of public policy in relation to happiness and GDP) one would want to ask why hasn’t there already been a reorientation in relation to other areas (e.g. environment and GDP) — or at least why has it been so slow.

QU: Is relative effects in obesity coming from status stuff or from signalling (i.e. I use other people’s weight to compute what the optimal weight is). Has importance to determining policy impact.

• 2008-06: There is now a pdf version of these comments available. This may be a better way to read this as some people have reported difficulties with viewing the maths in the page (requires mathml support — via firefox + mathml fonts or IE).

Back last October I was a participant in a “Networks” reading group that worked through “An Economic Model of Friendship: Homophily, Minorities and Segregation” by Currarini, Jackson and Pin (2007). The discussion at the time encouraged me to expend some effort in order to try and derive some of the paper’s results in what I believe is a simpler, and more intuitive, manner.

Having finally got round to writing/marking up my rough notes into computer friendly format (markdown + latexmathml) I’ve now posted them online at:

http://www.rufuspollock.org/economics/papers/comments-on-currarini-jackson-pin-2007

Herewith are further (partial, impressionistic) notes from the second day of the two-day workshop (programme) on Rationality and Emotions organized by Miriam Teschl at Robinson College here in Cambridge.

S-Shaped Probability Weighting and Hyperbolic Preference Reversal - An Intimate Relationship by Herbert Walther

Walther has published these results as a 2003 paper in Journal of Economic Behaviour and Organization.

http://www.robinson.cam.ac.uk/academic/robinson_rationality_walther.pdf

Overview

• Empirical regularities:
  • hyperbolic discounting
  • sign effect: loss discounted less than gains
  • preference reversal:
  • magnitude effect: preference for losses before gains
  • s-shaped prob weighting (Gonzales and Wu 1999, Fehr-Duda, 2006 et al.)
    • prob weighting can explain Allais paradox
• How to resolve?
• Ans: EU maximizer considers anticipated emotions reactions to resoluton of uncertainty
  • prob weight derived via intertemporal state dependent EU max
  • using this can explain most empirical effects

Model and Results

Part 1: Generating the S-shape prob distbn

• EU of some binary prospect L(p, w1, w2), w1
• EU of wealth
• EU of elation (if you win)
• EU of disappointment (if you lose)
• last two both fade away over time

Part 2: Empirical regularities

Having generated the S-shaped result Walther goes on to show how this can generate most of the empirical regularities we are interested in.

• Look at some payment/contract whose probability of payment fulfilment is falling over time (this way we get probability in which we need)
• Now have some S-shaped setup and probability that goes into this S-shape is dropping over time (contract is less likely to be fulfilled).
• Hyperbolic discounting: can also now generate hyperbolic discounting within this same framework (other explanations e.g. Souzou 1998, Dasgupta and Maskin (2005) only do it on its own).
  • Logic underlying hyperbolicity: at start contract is very likely to be fulfilled so if it does not lots of disappointment — so (exp) discount rate is very high. Over time prob falls and S-shape prob distbn kicks in (so elation outweighing disappointment) and discount rate falls.
  • prediction: poor will show more hyperbolicity than rich
• The sign effect: gains discounted more than losses
  • Logic: again simple. If loss is very likely little disappointement but a very certain gain has lots of potential for disappointment.
  • prediction: again the sign effect is more pronounced for poor than the rich.
  • magnitude effect for losses: higher losses have higher impact that lower losses (because straightforward wealth utility becomes more important than disappointment/elation effect).
• preference reversal
  • poor will prefer losses before rich subject but gains after rich subject
  • preferences are same but marginal utility of wealth is different

Summary

• Simple model that is a small extension of basic EU maximization most of the empirical regularities.
• If diminishing marginal utility of wealth poor people will behave ‘less rationally’ than rich people despite having same preferences
• For the future: Why is prob weighting evolutionary sustainable?
  • potential answer: in hunter gather society there are externalities in that (large) gains and losses are shared (this would => S-shaped prob distbn).

“It’s a boy! Behavioural and Neural Evidence on Self Delusion” by Danica Mijovic-Prelec

• Deficits (due to lesion) on right side of brain lead to deficits in left hemisphere
• Furthermore these patients are not aware of the deficit and deny its existence (to the extent of confabulating experiences)
• Sackheim-Gur 1979: self-deception in social psychology
  • played people mixture of their own phone and others
  • averse to your own voice
  • people would not hear their own voice and furthermore physiological measure of stress indicated it went up when ‘not hearing their voice (when it was there) — i.e. when people were self-deceiving
• Sackheim-Gur criteria:
  • individual holds 2 contradictory beliefs
  • beliefs held simultaneously
  • individual is not aware of of holding one of the two beliefs
  • nonawareness of this belief is motivated

Experiment

• shown korean figures and asked to classify as male/female
• first stage: get figures and must classify (5c for each correct prediction — correct measured against classification by some control group)
• second stage: must also predict gender of next figure (and then classify)
  • paid like before for classification but bonus for being in top x% of predictors

Results

• Focus on items that were ‘well-classified’ by control
• First classification: 65% accurate
• Anticipation: 50% accurate (as expected since randomized)
• Second classification: <65%
  • anticipation effects classification
• stronger for males: anticipated as male results in classification as male 72% (for females like first time round)
• calculate self-delusion index for each subject
  • four options for response pattern (starting with female) of form 1st classif, anticipation, 2nd classif:
    • FMF: honest
    • FMM: self-deluding
    • FFM: inconsistent
    • FFF: consistent
  • need to subtract inconsistency from self-delusion percentage to get ‘true’ self-delusion
  • index = % self-delusion / % inconsistency (could use difference)
• fMRI
  • expect that self-deluding subjects behave differently from inconsistent (and honest and consistent)
    • notably don’t show this activation on consistent trial (when they also confirm their prediction)
  • this is what they find (v. significantly)
  • in attentional and cog. control regions
    • self-deluding and inconsistent is similar
    • however big difference in parahippocampal gyrus (associated with memory)
• [rp] question: could some of this come from a priming effect combined with better recall. I anticipate X, which primes me. Then suppose I see the figure and have a vague recall from before. Suppose that people experience different priming effects — then those with a strong priming effect feel conflicted and have more stress (i remember Y sort of but do I really or I just doubtful because of having seen X) which means more fMRI anomalies and and means they are more likely to ’self-delude’ while those with weak priming simply aren’t sure what they think (not really excited/conflicted) and just go randomly with M/F (so ’self-delusion’ or ‘inconsistency’ are equally likely).

Herding and Social Influence in Economic Decision Making by Michelle Baddeley

• Solomon Asch
  • Length of line experiments (everyone says line is B when actually A)
• Task design: stock-picking
  • two charts for past prices of a stock
  • shown faces along with their associated choice (controlled by experimenter)
• Results:
  • strong effect of other decisions on own decision (on average 72% vs. 50% choose the one chosen by herd)
  • perhaps not very surprising here given the lack of info about stocks (and their underlying equivalence) — a small piece of information should have a dramatic effect