This morning Peter Cramton and Larry Ausubel were on NPR talking about their reverse auction proposal, and The Chronicle of Higher Education writes about how little advice Congress got from economists on the financial rescue plans (i.e. not only how but what to buy, etc):
In Dismal Times, Economists Try to Shape Financial Debates (a permanent link for subscribers here)
Some quotes:
"Legislation drafted in haste and negotiated with recalcitrant partners is going to be bad legislation"
"Despite his frustrations with Congress, Mr. Galbraith says that he learned from watching his father for many years that it is important never to condescend to policy makers. “These are serious people, and you need to speak to them in a candid and serious way,” he says. “The question is not so much what economists need to say to policy makers, but what kind of policy education economists need in order to be able to intelligently understand the constraints that policy makers operate under.”
But one of the professors who joined Mr. Zingales in writing the anti-bailout petition takes a dimmer view of economists' efforts to speak directly into lawmakers' ears.
“The business of advice remains what it was,” says John H. Cochrane, a professor of finance at the University of Chicago. “You have to be willing become a sort of media person. You have to tailor your advice to what people want to hear, and then shade it a bit in the direction of common sense.” "
Friday, October 10, 2008
Online advertising--Ben Edelman
Securing Online Advertising: Rustlers and Sheriffs in the New Wild West
There's a lot of fraud in online advertising, in all the directions you can think of and some you probably haven't. Here's the paper.
I nominate Ben Edelman for Sheriff.
There's a lot of fraud in online advertising, in all the directions you can think of and some you probably haven't. Here's the paper.
I nominate Ben Edelman for Sheriff.
Thursday, October 9, 2008
Electric Car Stations in Hawaii
How can you enact a move from a gas station based fueling grid to an electric charging station based grid? Easy - start on an island. Behind this effort is Better Place, a California based start up with a vision of creating a network of charging stations for electric cars.
"California-based company Better Place will operate the stations on a subscription-based system. Owners could sign-up for a monthly plan or choose to pay as they use. The company will own the batteries, which can run upwards to $11,000, and loan them out to drivers."
http://gas2.org/2008/10/07/hawaii-to-get-electric-car-battery-sharing-program/
"California-based company Better Place will operate the stations on a subscription-based system. Owners could sign-up for a monthly plan or choose to pay as they use. The company will own the batteries, which can run upwards to $11,000, and loan them out to drivers."
http://gas2.org/2008/10/07/hawaii-to-get-electric-car-battery-sharing-program/
Organs for transplantation
The Economist has a good article summarizing The gap between supply and demand for transplantable organs around the world, and the various ways in which organs are and have been obtained, and some of the factors that get in the way of increasing supply.
The article has a table that makes the often overlooked point that the U.S. has very high donation rates of both live and deceased donor organs compared to most other countries*, despite having an opt-in system (you aren't a donor unless you (or your next of kin) says you are). But the shortage persists...
*The U.S. has the second highest live donor rate after Iran, which has a market for kidneys, and second highest deceased donor rate after Spain. When I spoke about kidney exchange at the Barcelona Clinic in 2004, the transplant coordinators there attributed their success to the professionalization of the job of acquiring deceased donor organs.
hat tip to Juan Camilo Cardenas
The article has a table that makes the often overlooked point that the U.S. has very high donation rates of both live and deceased donor organs compared to most other countries*, despite having an opt-in system (you aren't a donor unless you (or your next of kin) says you are). But the shortage persists...
*The U.S. has the second highest live donor rate after Iran, which has a market for kidneys, and second highest deceased donor rate after Spain. When I spoke about kidney exchange at the Barcelona Clinic in 2004, the transplant coordinators there attributed their success to the professionalization of the job of acquiring deceased donor organs.
hat tip to Juan Camilo Cardenas
Auctions for airline takeoff and landing slots, continued
Feds Go Forward With NYC Airport Experiment
Plans for slot auctions at LaGuardia, Kennedy, and Newark continue, but it sounds like the fight is far from over.
"Federal transportation officials say much of the reason for nationwide flight delays is that airlines have tried to cram too many planes -- and too many small planes -- onto New York runways, and the overscheduling just isn't realistic.
To fix that, they have capped the number of flights coming into or out of those airports, and now intend to auction off a fraction of those coveted slots to airline bidders. An auction, they say, will use market forces of supply and demand to make the flight schedule more efficient."
...
" Critics of the plan are furious.
''It is simply shocking that the DOT is unabashedly continuing this ideological battle despite the staunch opposition from the entire aviation community and the independent finding that the DOT lacks the power under the law to implement the proposal in the first place,'' Sen. Charles Schumer, D-N.Y., said in a statement."
Plans for slot auctions at LaGuardia, Kennedy, and Newark continue, but it sounds like the fight is far from over.
"Federal transportation officials say much of the reason for nationwide flight delays is that airlines have tried to cram too many planes -- and too many small planes -- onto New York runways, and the overscheduling just isn't realistic.
To fix that, they have capped the number of flights coming into or out of those airports, and now intend to auction off a fraction of those coveted slots to airline bidders. An auction, they say, will use market forces of supply and demand to make the flight schedule more efficient."
...
" Critics of the plan are furious.
''It is simply shocking that the DOT is unabashedly continuing this ideological battle despite the staunch opposition from the entire aviation community and the independent finding that the DOT lacks the power under the law to implement the proposal in the first place,'' Sen. Charles Schumer, D-N.Y., said in a statement."
Adoption in Korea
Korea Aims to End Stigma of Adoption and Stop ‘Exporting’ Babies
"Daunted by the stigma surrounding adoption here, Cho Joong-bae and Kim In-soon delayed expanding their family for years. When they finally did six years ago, Mr. Cho chose to tell his elderly parents that the child was the result of an affair, rather than admit she was adopted."
"Daunted by the stigma surrounding adoption here, Cho Joong-bae and Kim In-soon delayed expanding their family for years. When they finally did six years ago, Mr. Cho chose to tell his elderly parents that the child was the result of an affair, rather than admit she was adopted."
Market for political ads
A NYT story about presidential political ads caught my eye with the following observation about the fact that ads also garner free media:
"The ad showcased another ad strategy employed by both campaigns -- it was running only on national cable, a relatively inexpensive way of drawing media attention to an issue."
"The ad showcased another ad strategy employed by both campaigns -- it was running only on national cable, a relatively inexpensive way of drawing media attention to an issue."
Tuesday, October 7, 2008
Prediction markets--history
Historical Political Futures Markets: An International Perspective by Paul W. Rhode, Koleman Strumpf - #14377 (DAE)
Abstract:
Political future markets, in which investors bet on election outcomes, are often thought a recent invention. Such markets in fact have a long history in many Western countries. This paper traces the operation of political futures markets back to 16th Century Italy, 18th Century Britain, and 19th Century United States. In the United States, election betting was a common part of political campaigns in the antebellum period, but became increasingly concentrated in the organized futures markets in New York City over the postbellum period.
http://papers.nber.org/papers/W14377
Abstract:
Political future markets, in which investors bet on election outcomes, are often thought a recent invention. Such markets in fact have a long history in many Western countries. This paper traces the operation of political futures markets back to 16th Century Italy, 18th Century Britain, and 19th Century United States. In the United States, election betting was a common part of political campaigns in the antebellum period, but became increasingly concentrated in the organized futures markets in New York City over the postbellum period.
http://papers.nber.org/papers/W14377
Monday, October 6, 2008
A rose by any other name: marriage market version
'Bride' and 'Groom' to Be Restored to Calif. Forms
"When same-sex marriage became legal in the state on June 16, new marriage forms were issued with ''Party A'' and ''Party B'' where ''bride'' and ''groom'' used to be.
The new paperwork, which county clerks must start using Nov. 17, will have space for applicants' names next to optional boxes for checking ''bride'' or ''groom.'' "
"When same-sex marriage became legal in the state on June 16, new marriage forms were issued with ''Party A'' and ''Party B'' where ''bride'' and ''groom'' used to be.
The new paperwork, which county clerks must start using Nov. 17, will have space for applicants' names next to optional boxes for checking ''bride'' or ''groom.'' "
Sunday, October 5, 2008
Gaming the system, changing the rules. Pro Football
Rules evolve, as changes are made in reaction to unwanted behavior that the old rules elicit. The NFL will now allow coaches to communicate by radio directly with defensive players, reducing the need for hand signals.
The NY Times reports:
"Maybe defensive coaches should thank New England Coach Bill Belichick for trying to steal their signals. The N.F.L. had discussed giving the communication system to defenses in previous years, but in 2006, the measure fell two votes short of approval.
"Last spring, after Belichick was found to be videotaping opponents’ defensive signals, teams approved the plan by two votes. The nays were cast mostly by teams with offensive-minded coaches. The decision largely minimized the need for the hand signals that Belichick had been trying to glean. The Patriots were among the teams that switched their vote, from opposed to in favor. "
The NY Times reports:
"Maybe defensive coaches should thank New England Coach Bill Belichick for trying to steal their signals. The N.F.L. had discussed giving the communication system to defenses in previous years, but in 2006, the measure fell two votes short of approval.
"Last spring, after Belichick was found to be videotaping opponents’ defensive signals, teams approved the plan by two votes. The nays were cast mostly by teams with offensive-minded coaches. The decision largely minimized the need for the hand signals that Belichick had been trying to glean. The Patriots were among the teams that switched their vote, from opposed to in favor. "
Market for Basketball Players
At 19, Plotting New Path to N.B.A., via Europe
The NY Times reports that "The N.B.A. changed its eligibility rules for the 2006 draft, requiring players to be at least a year past their high school graduating class before turning pro."
That has sent some high school stars to college, but another path is to play pro ball in Europe, while waiting for the NBA.
The NY Times reports that "The N.B.A. changed its eligibility rules for the 2006 draft, requiring players to be at least a year past their high school graduating class before turning pro."
That has sent some high school stars to college, but another path is to play pro ball in Europe, while waiting for the NBA.
Saturday, October 4, 2008
Market design by committee
In the NY Times, A Snarl of Regulation quotes Secretary Paulson:
"Few, if any, will defend our current Balkanized system as optimal"
It comes with a diagram of the current financial regulatory organizations.
"Few, if any, will defend our current Balkanized system as optimal"
It comes with a diagram of the current financial regulatory organizations.
Friday, October 3, 2008
Auctioneers and sellers: Sotheby's mixed role
The WSJ reports Sotheby's Faces Suit Over Disclosure
"Mr. Minor's attorneys say he purchased the work on advice from a Sotheby's specialist and didn't realize the auction house was selling the work to recoup money owed it by another collector. ...
Mr. Minor's suit highlights the increasingly blurred lines that can develop at auction houses between their traditional role as disinterested auctioneers and their emerging business as direct stakeholders or financiers of the work they auction. In their competition for market share and their battle to secure top art work, Sotheby's and Christie's are increasingly acquiring, trading and preselling stakes in works they auction."
...
"For buyers, deciphering the financial dealings behind a work of art has become increasingly difficult. In some cases, like Mr. Minor's, auction houses sell the work as collateral for loans. More commonly, they issue so-called "guarantees" -- promises to pay the seller a minimum price for the work sold through the auction house. The auction house has to pay the guarantee even if the work doesn't sell, so it becomes an effective stakeholder.
Guarantees have surged in recent years. Last year, Sotheby's issued $902 million in guarantees, double the amount in 2006, according to securities filings."
"Mr. Minor's attorneys say he purchased the work on advice from a Sotheby's specialist and didn't realize the auction house was selling the work to recoup money owed it by another collector. ...
Mr. Minor's suit highlights the increasingly blurred lines that can develop at auction houses between their traditional role as disinterested auctioneers and their emerging business as direct stakeholders or financiers of the work they auction. In their competition for market share and their battle to secure top art work, Sotheby's and Christie's are increasingly acquiring, trading and preselling stakes in works they auction."
...
"For buyers, deciphering the financial dealings behind a work of art has become increasingly difficult. In some cases, like Mr. Minor's, auction houses sell the work as collateral for loans. More commonly, they issue so-called "guarantees" -- promises to pay the seller a minimum price for the work sold through the auction house. The auction house has to pay the guarantee even if the work doesn't sell, so it becomes an effective stakeholder.
Guarantees have surged in recent years. Last year, Sotheby's issued $902 million in guarantees, double the amount in 2006, according to securities filings."
Slow liquidation of Wachovia Short Term Fund
The NY Times reports: Colleges Scramble as Investment Fund Freezes.
To avoid a run as it liquidates (with withdrawals outpacing the ability of the fund to sell its short term assets in an orderly way), Wachovia has limited the rate at which its investors (colleges) can withdraw.
To avoid a run as it liquidates (with withdrawals outpacing the ability of the fund to sell its short term assets in an orderly way), Wachovia has limited the rate at which its investors (colleges) can withdraw.
Prison economy
The WSJ writes about currency substitutes for trade among inmates in
American prisons (subscription required):
Mackerel Economics in Prison Leads to Appreciation for Oily Fillets
Packs of Fish Catch On as Currency, Former Inmates Say; Officials Carp
"Unlike those more expensive delicacies, former prisoners say, the mack is a good stand-in for the greenback because each can (or pouch) costs about $1 and few -- other than weight-lifters craving protein -- want to eat it."
American prisons (subscription required):
Mackerel Economics in Prison Leads to Appreciation for Oily Fillets
Packs of Fish Catch On as Currency, Former Inmates Say; Officials Carp
"Unlike those more expensive delicacies, former prisoners say, the mack is a good stand-in for the greenback because each can (or pouch) costs about $1 and few -- other than weight-lifters craving protein -- want to eat it."
Thursday, October 2, 2008
Prediction Markets at Best Buy
Best Buy is running one of the largest internal corporate prediction markets. The experiment raises interesting questions about incentives for managers whose projects are "listed" on the market, as well as questions about how to design simple interfaces that thousands of non-experts can use.
"When executives at electronics retailer Best Buy Co. want to know if a new product or idea is likely to succeed, they can seek the opinion of rank-and-file employees by turning to the company's "prediction market."
"When executives at electronics retailer Best Buy Co. want to know if a new product or idea is likely to succeed, they can seek the opinion of rank-and-file employees by turning to the company's "prediction market."
The market, called TagTrade, allows Best Buy's workers to trade imaginary stocks based on answers to managers' questions. The market's judgment has often proved to be more accurate than the company's official forecasts."
(subscription required to see full article)
The credit crisis: anatomy of a market failure
The NY Times reports on 36 Hours of Alarm and Action as Crisis Spiraled.
"...But contagion was already spreading. The problem posed by the Lehman bankruptcy was not the losses suffered by hedge funds and other investors who traded stocks or bonds with the firms. As federal officials had predicted, that turned out to be manageable. (That was one reason the government did not step in to save the firm.)
The real problem was that a handful of hedge funds that used the firm’s London office to handle their trades had billions of dollars in balances frozen in the bankruptcy. "
"...But contagion was already spreading. The problem posed by the Lehman bankruptcy was not the losses suffered by hedge funds and other investors who traded stocks or bonds with the firms. As federal officials had predicted, that turned out to be manageable. (That was one reason the government did not step in to save the firm.)
The real problem was that a handful of hedge funds that used the firm’s London office to handle their trades had billions of dollars in balances frozen in the bankruptcy. "
University tuition in England
Top universities are funded differently in the UK and the US:
Oxford's Chancellor Argues for Raising Tuition Fee .
Oxford would like to have more control over its tuition.
(Recall my earlier post: University tuition in Israel )
Oxford's Chancellor Argues for Raising Tuition Fee .
Oxford would like to have more control over its tuition.
(Recall my earlier post: University tuition in Israel )
Wednesday, October 1, 2008
Auction design for bailout by treasury--Ausubel and Cramton
Peter Cramton writes: Dear Al,
Here is the longer version of my paper with Larry Ausubel on possible details of a troubled asset reverse auction. It might even be a good topic for your market design class.
"A Troubled Asset Reverse Auction" (with Lawrence M. Ausubel), Working Paper, University of Maryland, September 2008. [Presentation]
A Troubled Asset Reverse Auction
Lawrence M. Ausubel and Peter Cramton
30 September 2008
Summary
The US Treasury has proposed purchasing $700 billion of troubled assets to restore liquidity and solve the current financial crisis, using market mechanisms such as reverse auctions where appropriate. This paper presents a high-level design for a troubled asset reverse auction and discusses the auction design issues. We assume that the key objectives of the auction are to:
· provide a quick and effective means to purchase troubled assets and increase liquidity;
· protect the taxpayer by yielding a price for assets related to their value; and
· offer a transparent rules-based process that minimizes discretion and favoritism.
We propose a two-part approach.
Part 1. Groups of related securities are purchased in simultaneous descending clock auctions. The auctions operate on a security-by-security basis to avoid adverse selection. To assure that the auction for each security is competitive, the demand for each security is capped at the total quantity offered by all but the largest three sellers. Demand bids from private buyers are also allowed. The simultaneous clock auctions protect the taxpayer by yielding a competitive price for each security and allow bidders to manage liquidity constraints and portfolio risk. The resulting price discovery also improves the liquidity of the securities that are not purchased in the auctions.
Part 2. Following Part 1, the remaining quantity is purchased in descending clock auctions in which many securities are pooled together. To minimize adverse selection, reference prices are calculated for each security from a model that includes all of the characteristics of each security including the market information revealed in the security-by-security auctions of Part 1. Bids in the pooled auctions are specified in terms of a percentage of the reference price for each security.
The two parts are complementary. Part 1 quickly adds liquidity and establishes competitive market prices for many securities. Additional assets are then purchased in Part 2, taking full advantage of the market information revealed in Part 1.
Clock auctions have been used successfully in the electricity and natural gas sectors for assets worth tens of billions of dollars over the last seven years. Related approaches have been used to auction emission allowances, radio spectrum, timber rights, and rough diamonds.
The approach is feasible even on an extremely tight timetable. The development of the reference price model and data will require the most time to complete, but fortunately this is not needed until Part 2. The auctions of Part 1 can begin in a matter of weeks.
We limit the scope of the paper to taking the legislation as given and providing an auction design within the requirements of the legislation.
The paper is organized as follows. We begin by explaining the adverse selection problem that arises when different securities are pooled together. Then we provide an overview of the two-part reverse auction plan. Next we develop details of Part 1, the security-by-security auctions. We then present the motivation for the simultaneous descending clock auction. Next we present further details of Part 2, the pooled auctions. Then we explore how stock warrants and senior debt can be usefully incorporated into the purchases of troubled assets. Next we discuss the feasibility of successful implementation on an expedited schedule. We conclude that the design achieves the key objectives and can be implemented with minimal risk in a short period of time.
Here is the longer version of my paper with Larry Ausubel on possible details of a troubled asset reverse auction. It might even be a good topic for your market design class.
"A Troubled Asset Reverse Auction" (with Lawrence M. Ausubel), Working Paper, University of Maryland, September 2008. [Presentation]
A Troubled Asset Reverse Auction
Lawrence M. Ausubel and Peter Cramton
30 September 2008
Summary
The US Treasury has proposed purchasing $700 billion of troubled assets to restore liquidity and solve the current financial crisis, using market mechanisms such as reverse auctions where appropriate. This paper presents a high-level design for a troubled asset reverse auction and discusses the auction design issues. We assume that the key objectives of the auction are to:
· provide a quick and effective means to purchase troubled assets and increase liquidity;
· protect the taxpayer by yielding a price for assets related to their value; and
· offer a transparent rules-based process that minimizes discretion and favoritism.
We propose a two-part approach.
Part 1. Groups of related securities are purchased in simultaneous descending clock auctions. The auctions operate on a security-by-security basis to avoid adverse selection. To assure that the auction for each security is competitive, the demand for each security is capped at the total quantity offered by all but the largest three sellers. Demand bids from private buyers are also allowed. The simultaneous clock auctions protect the taxpayer by yielding a competitive price for each security and allow bidders to manage liquidity constraints and portfolio risk. The resulting price discovery also improves the liquidity of the securities that are not purchased in the auctions.
Part 2. Following Part 1, the remaining quantity is purchased in descending clock auctions in which many securities are pooled together. To minimize adverse selection, reference prices are calculated for each security from a model that includes all of the characteristics of each security including the market information revealed in the security-by-security auctions of Part 1. Bids in the pooled auctions are specified in terms of a percentage of the reference price for each security.
The two parts are complementary. Part 1 quickly adds liquidity and establishes competitive market prices for many securities. Additional assets are then purchased in Part 2, taking full advantage of the market information revealed in Part 1.
Clock auctions have been used successfully in the electricity and natural gas sectors for assets worth tens of billions of dollars over the last seven years. Related approaches have been used to auction emission allowances, radio spectrum, timber rights, and rough diamonds.
The approach is feasible even on an extremely tight timetable. The development of the reference price model and data will require the most time to complete, but fortunately this is not needed until Part 2. The auctions of Part 1 can begin in a matter of weeks.
We limit the scope of the paper to taking the legislation as given and providing an auction design within the requirements of the legislation.
The paper is organized as follows. We begin by explaining the adverse selection problem that arises when different securities are pooled together. Then we provide an overview of the two-part reverse auction plan. Next we develop details of Part 1, the security-by-security auctions. We then present the motivation for the simultaneous descending clock auction. Next we present further details of Part 2, the pooled auctions. Then we explore how stock warrants and senior debt can be usefully incorporated into the purchases of troubled assets. Next we discuss the feasibility of successful implementation on an expedited schedule. We conclude that the design achieves the key objectives and can be implemented with minimal risk in a short period of time.
Job market; online and offline
A NY Times columnist surveys the uses of different job search technologies, from shoe leather, to the internet, to the social internet: Job Hunting Is, and Isn’t, What It Used to Be
"The big three sites are Monster.com, CareerBuilder.com and Yahoo HotJobs.com. Craigslist is also a popular option, as are those like Indeed.com and SimplyHired.com, which aggregate big and small jobs sites.
"Niche sites are also growing. Doctors can check out PracticeMatch.com; those seeking nonprofit work can go to Idealist.org. TheLadders.com is popular for job seekers looking for executive positions that pay more than $100,000 a year."
"Mr. Challenger suggests limiting yourself to surfing such sites only after dinner. Use the daytime to get out and meet people as much as possible."
"The big three sites are Monster.com, CareerBuilder.com and Yahoo HotJobs.com. Craigslist is also a popular option, as are those like Indeed.com and SimplyHired.com, which aggregate big and small jobs sites.
"Niche sites are also growing. Doctors can check out PracticeMatch.com; those seeking nonprofit work can go to Idealist.org. TheLadders.com is popular for job seekers looking for executive positions that pay more than $100,000 a year."
"Mr. Challenger suggests limiting yourself to surfing such sites only after dinner. Use the daytime to get out and meet people as much as possible."
Subscribe to:
Posts (Atom)
Posts
