To be edited
Much aof this post is based around the the Liberal Paradox (see here for an exposition, http://en.wikipedia.org/wiki/Liberal_paradox).
My attempt at a short summary of the paradox is this.
In a society where everyone has a choice over some decision (minimal liberty), then society may reach a situation where it is possible to make at least one person better off and no-one else worse off (Pareto inefficient). The reason this is so undesirable is that unlike much political or economics thought there, a change in the desicions doesn't imply re-distribution of utility, there is no loser. You are not taking utility/wealth from one individual or group to give to another. Everyone can be better off.
Does that sound, particularly important? Well I think it should as it seems to contradict one of the basic fundamentals of economics that free markets are efficient. Equally it has mainy implications for sociology, politics etc.
My understanding of the intuition behind the result is basiclly driven by allowing people to care about the decisions that others make. This can then lead to a cordination failure, where you might take a decision which is optimal for you, but which someone else dislikes and vice versa. In many ways the situation resembles a trade scenario.
Are there are any ways out of this paradox? Well the one which seems most immediately obvious is that perhaps the preference structures when the paradox occurs look odd. Is it really likely someone will care more about, what you do than about what they do themselves? I actually think this is certainly possible; but suppose people limited their preferences to states of the world over which they have influence and are indifferent to all decisions of other people. Clearly this lets you out of the paradox. People choose over some decision, they are the only one's that have preferences over that decision and therefore clearly the best state of the world is chosen.
This might seem an attractive idea. In fact it is similar to what some liberals might argue over many situations, that people should not be allowed to care or influence things that don't affect them, such as the religous beliefs or sexual preferences of someone else.
This is likely to become problematic however. Where is the line drawn between what affects others and what doesn't? The fact someone drives a car may seem to only affect them, but still it takes up road space and denies that to others. In some sense every individual's existence clearly affects others. Perhaps its useful to think of this in a chaotic sense, with all things interlinked to a greater or lesser extent. But is this not problematic, now we have individual's being affected all around the world but they are unlikely to have preferences at all over most of those situations and in the ones that they do they may be unable to tell what it is they need to have preferences over and what caused that.
The problem is the line becomes very grey, clearly everything effects each other even in a minor way, the mere act of existing in one place prevents someone else from standing there. (also in a (less relevent) Chaos type of way).
Tbc
Monday 23 March 2009
the Goodwin pension
This is a few weeks late to be topica, although the whole issue of pensions has arisen again now, in the states with AIG, it's worth pointing out.
I'm just slightly bemused why people are quite so upset and angered at the Fred Goodwin pension.
It's not the actual sums of money that are important, Goodwin's £700k a year pension is absolute peanuts, compared to the size of the various bank bailouts. The real issue is that such guarantees were in place whilst he and others were in control. This form of protection for executives should things go belly up, as the did, gives no incentives for good and safe managment at all.
Although I agree who Goodwin feels no shame in accepting such a some after his failure is surprissing.
I'm just slightly bemused why people are quite so upset and angered at the Fred Goodwin pension.
It's not the actual sums of money that are important, Goodwin's £700k a year pension is absolute peanuts, compared to the size of the various bank bailouts. The real issue is that such guarantees were in place whilst he and others were in control. This form of protection for executives should things go belly up, as the did, gives no incentives for good and safe managment at all.
Although I agree who Goodwin feels no shame in accepting such a some after his failure is surprissing.
Friday 20 March 2009
Morality of Poker
[Work in Process]
There are many groups of people for whom the morality of playing poker, particularly of pro players who make their living from doing so, is viewed dimly. This post assess some of the potential arguments on the subject.
I believe there are three main arguments against the playing of poker, which I will categorize as follows. It is:
Exploitative – One man’s gain is another man’s loss
Addictive – It is possible for some individual's to become addicted. Addiction as a physiological condition would appear detrimental to an individual, but even milder forms can be condemned. Some religious beliefs may suggest, whether truly addicted or not the game itself can become a player's 'idol'.
Monetary – It could be argued that the game is clearly and inexplicably linked to individuals' desire for money. This seems irrefutable in terms of cash games, although tournament poker players could adopt a line of argument claiming the game is a sport, with the tournament fee as an entry fee and monetary gains as subsequent prizes.
Firstly lets examine the exploitative argument. The argument seems to be that engagin in a zero-sum) or negative sum if there is rake) game is socially unbenefical. If there is no additional utility to either palyer from playign the game then this appears to be true. A benevolent social planner could theoretical force the player's to spend their time in a different activity creating additional GDP/welfare, or even simpler prvent the player's from playing and net social welfare will be higher. You can see this simply, because now utility is gained from playing it is simply redistributed, but the value of each player's time is a cost that is incurred. Preventing this cost whilst losing no benefit must surely raise social utility. (clearly assuming additivity of inidivdual utilities). I will relaz the assumption of no utility from playing the game later.
A possible defense to this exploitative argument comes from liberalism. The opponents in the game have willingly chosen to play. Should it therefore be right to restrict them from doing so? Liberalism would suggest it is incorrect to ban consenting adults from an activity, that does not affect a third party.[1] It is also possible that the agents are risk loving or have differing beliefs about who is the better player, thus both desiring to play, although they know that someone will gain and someone will lose.
A minor point that may also be worth making, is that anyone with the time and capacity to play poker, particularly online poker with the requirement of access to a PC, is unlikely to be on the breadline. This might suggest that whilst the game is exploitative the very lowest in society are censored away from this risk. It may not though, as individual players could equally be well in debt.
I turn now to addiction to the game. It would appear clear that addiction to the game is real possibility. I have not done sufficient research or have sufficient data to analyse the extent of this. I suspect that such instances will be confined to certain types of people with addictive personalities, although these may also be the most vulnerable people.
Finally turning to the 'love of moeny' argument. The monetary gain is best defined, by either viewing it as a profitable pastime, no different to a hobby. Or, if a pro, then in no different way than if it were a job. It may be considered a problem if one were to reach the stage where they kept playing for the monetary gains, particular if they no longer needed to financially. This situation can arise and clearly has with the top pros of the game. These people could retire and never work or play again. However there inevitably continue to play, whether this is due to love of the game or greed may be hard to tell, but given that they continue to play at high stakes and there are persistent rumours of well known pros going broke, one would suggest they are still playing for the money.
Moving on to arguments about the lack of value created by a pro, compared to someone in a regular job. Firstly it is important to distinguish that very few jobs indeed provide essential services, farmers, doctors, housebuilders, water companies and heating companies are perhaps amongst the few that can fit into such a category. All other jobs create wealth but only because people value what they produce this is a very important and fundamental concept in economics. Sure it seems likely that a teacher or lawyer is creating something more valuable but only because we are valuing the knowledge of future generations and the presence of a well defined legal system.
Move on now to industries such as defense and whilst they may create stability and security for countries individually, it would seem clear that globally such spending whilst gdp enhancing is actually welfare destroying, how much more beneficial would people value that spending if it were spent on healthcare or road building for instance. The point I’m trying to make is that people do not need to take a job that is clearly produces something like a car, so long as other willing adults will pay the wage. One way perhaps to think about a poker pro, is that his wage is being paid by recreational gamblers, who are derive entertainment from playing. Sure they would have a greater benefit were they to win, but there are market forces at work, and players will work to improve their game until the value of doing so is similar to another wage in the job market. That is the work and practice and hours required to take a sensible wage out of the game is hard. Although it is scalable, in that if you are good you can move up stakes.
Also think of some of the pros as sports stars, with their sponsorship and TV deals. Also it is necessary at times to think about the whether Tournament poker could be considered a sport. Clearly there is skill involved, but there is also luck in any short run, so it is a game that blends luck with skill, where the luck is a much larger component than in other sports such as football or games like chess. It’s interesting to note also that variance can last a lifetime, more so in tournaments than elsewhere, particularly large live tournaments where there are relatively few, the WSOP is just once a year, no lifetime of 60ish runs at the tournament is enough to get even close to erasing that variance.
[1] It could be argued that everything affects a third party in a chaotic sense, or more specifically that such a game does effect third parties, particularly if addiction leads a broke player into crime for instance.
There are many groups of people for whom the morality of playing poker, particularly of pro players who make their living from doing so, is viewed dimly. This post assess some of the potential arguments on the subject.
I believe there are three main arguments against the playing of poker, which I will categorize as follows. It is:
Exploitative – One man’s gain is another man’s loss
Addictive – It is possible for some individual's to become addicted. Addiction as a physiological condition would appear detrimental to an individual, but even milder forms can be condemned. Some religious beliefs may suggest, whether truly addicted or not the game itself can become a player's 'idol'.
Monetary – It could be argued that the game is clearly and inexplicably linked to individuals' desire for money. This seems irrefutable in terms of cash games, although tournament poker players could adopt a line of argument claiming the game is a sport, with the tournament fee as an entry fee and monetary gains as subsequent prizes.
Firstly lets examine the exploitative argument. The argument seems to be that engagin in a zero-sum) or negative sum if there is rake) game is socially unbenefical. If there is no additional utility to either palyer from playign the game then this appears to be true. A benevolent social planner could theoretical force the player's to spend their time in a different activity creating additional GDP/welfare, or even simpler prvent the player's from playing and net social welfare will be higher. You can see this simply, because now utility is gained from playing it is simply redistributed, but the value of each player's time is a cost that is incurred. Preventing this cost whilst losing no benefit must surely raise social utility. (clearly assuming additivity of inidivdual utilities). I will relaz the assumption of no utility from playing the game later.
A possible defense to this exploitative argument comes from liberalism. The opponents in the game have willingly chosen to play. Should it therefore be right to restrict them from doing so? Liberalism would suggest it is incorrect to ban consenting adults from an activity, that does not affect a third party.[1] It is also possible that the agents are risk loving or have differing beliefs about who is the better player, thus both desiring to play, although they know that someone will gain and someone will lose.
A minor point that may also be worth making, is that anyone with the time and capacity to play poker, particularly online poker with the requirement of access to a PC, is unlikely to be on the breadline. This might suggest that whilst the game is exploitative the very lowest in society are censored away from this risk. It may not though, as individual players could equally be well in debt.
I turn now to addiction to the game. It would appear clear that addiction to the game is real possibility. I have not done sufficient research or have sufficient data to analyse the extent of this. I suspect that such instances will be confined to certain types of people with addictive personalities, although these may also be the most vulnerable people.
Finally turning to the 'love of moeny' argument. The monetary gain is best defined, by either viewing it as a profitable pastime, no different to a hobby. Or, if a pro, then in no different way than if it were a job. It may be considered a problem if one were to reach the stage where they kept playing for the monetary gains, particular if they no longer needed to financially. This situation can arise and clearly has with the top pros of the game. These people could retire and never work or play again. However there inevitably continue to play, whether this is due to love of the game or greed may be hard to tell, but given that they continue to play at high stakes and there are persistent rumours of well known pros going broke, one would suggest they are still playing for the money.
Moving on to arguments about the lack of value created by a pro, compared to someone in a regular job. Firstly it is important to distinguish that very few jobs indeed provide essential services, farmers, doctors, housebuilders, water companies and heating companies are perhaps amongst the few that can fit into such a category. All other jobs create wealth but only because people value what they produce this is a very important and fundamental concept in economics. Sure it seems likely that a teacher or lawyer is creating something more valuable but only because we are valuing the knowledge of future generations and the presence of a well defined legal system.
Move on now to industries such as defense and whilst they may create stability and security for countries individually, it would seem clear that globally such spending whilst gdp enhancing is actually welfare destroying, how much more beneficial would people value that spending if it were spent on healthcare or road building for instance. The point I’m trying to make is that people do not need to take a job that is clearly produces something like a car, so long as other willing adults will pay the wage. One way perhaps to think about a poker pro, is that his wage is being paid by recreational gamblers, who are derive entertainment from playing. Sure they would have a greater benefit were they to win, but there are market forces at work, and players will work to improve their game until the value of doing so is similar to another wage in the job market. That is the work and practice and hours required to take a sensible wage out of the game is hard. Although it is scalable, in that if you are good you can move up stakes.
Also think of some of the pros as sports stars, with their sponsorship and TV deals. Also it is necessary at times to think about the whether Tournament poker could be considered a sport. Clearly there is skill involved, but there is also luck in any short run, so it is a game that blends luck with skill, where the luck is a much larger component than in other sports such as football or games like chess. It’s interesting to note also that variance can last a lifetime, more so in tournaments than elsewhere, particularly large live tournaments where there are relatively few, the WSOP is just once a year, no lifetime of 60ish runs at the tournament is enough to get even close to erasing that variance.
[1] It could be argued that everything affects a third party in a chaotic sense, or more specifically that such a game does effect third parties, particularly if addiction leads a broke player into crime for instance.
Wednesday 18 March 2009
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