The wholesale market for iPhone Apps

Joshua Gans reports: The Wholesale App Market opens.

Fraud in online auctions

Losing Out After Winning an Online Auction

NY Times article discusses deadbeat sellers and fraudulent escrow services.

More on repugnant language

While the Federal Communication Commission continues to regard the broadcast of some words as repugnant, language scholars continue to trace how taboo terms gradually become more acceptable. (See my earlier post Fleeting expletives and wardrobe malfunctions: FCC vs Fox Television and CBS.)


Oxford University Press has just issued a new edition of The F-Word. Their blurb begins:

"We all know what frak , popularized by television's cult hit Battlestar Galactica , really means. But what about feck ? Or ferkin ? Or foul --as in FUBAR , or "Fouled Up Beyond All Recognition"? In a thoroughly updated edition of The F-Word , Jesse Sheidlower offers a rich, revealing look at the f-bomb and its illimitable uses. Since the fifteenth century, no other word has been adapted, interpreted, euphemized, censored, and shouted with as much ardor or force..."

Peer effects in learning and teaching, but not in golf

The October '09 issue of the American Economic Journal: Applied Economics contains three papers on peer effects.* The first of these begins "Is an employee's productivity influenced by the productivity of his or her nearby co-workers? The answer to this question is important for the optimal organization of labor...and for the optimal design of incentives." It then goes on to say that it detects no such effects from the random groupings of golfers in professional golf tournaments.

The second paper does find peer effects in random groupings of cadets at West Point, and the third paper finds that students do better when their teachers have better colleagues, i.e. they find that the teachers experience peer effects as measured by the performance of their students.

*The three papers are:

"Peer effects in the workplace: Evidence from random groupings in professional golf tournaments," by Jonathan Guryan, Kory Kroft, and Matthew J. Notowidigdo.

"The Effects of Peer Group Heterogeneity on the Production of Human Capital at West Point," by David S. Lyle.

"Teaching Students and Teaching Each Other: The Importance of Peer Learning for Teachers," by C. Kirabo Jackson and Elias Bruegmann.

Paul Milgrom: Nemmer's Prize Lecture and Conference

If the creeks don't rise, I'll be at Northwestern this afternoon, listening to Paul speak about "The Promise and Problems of Market Design"

His talk will be followed by a conference in his honor tomorrow.

Here's the abstract of Paul's talk:
"Market design has become an exciting area of economics research, with many of its findings useful for setting detailed rules in real markets. For matching markets, most proposed designs aim to be "straightforward" - making it a dominant strategy for participants to report information truthfully. But some recent matching and auction designs sacrifice incentive-compatibility conditions to give priority to various other desiderata. This lecture reviews the goals of market design and the unavoidable trade-offs that are sometimes required, and explores how economists should seek to resolve these trade-offs. "

Here's the conference lineup:

Vijay Krishna (Pennsylvania State University): Auctions and Information
Larry Ausubel (University of Maryland): Auctions with Multiple Objects
Panel Discussion: Market Design.Moderated by Rakesh Vohra (Northwestern University): Susan Athey (Harvard University), Preston McAfee (California Institute of Technology), Alvin Roth (Harvard University), Paul Milgrom (Stanford University)
Stephen Morris (Princeton University): Trade and Information
Bengt Holmstrom (Massachusetts Institute of Technology): Incentives
John Roberts (Stanford University): Organizational Design

Voters find same sex marriage repugnant in Maine

Maine voters overturn state’s new same-sex marriage law.
"Maine voters overturned the state’s same-sex marriage law yesterday, delivering a potentially crushing blow to gay-rights advocates after a year when their cause seemed to be gaining momentum with legislative and legal victories in four states."...
"The “people’s veto’’ came six months after Maine’s law was approved, and one year after California voters rejected gay marriage by a similar margin."

So same sex marriage has been moved out of the repugnant category in several states by courts, and by legislatures, but not yet by voters. As the AP report notes (ungrammatically),
"Gay marriage measures have lost in every state, 31 in all, in which it has been put to a popular vote. "

The DARPA network challenge

DARPA will pay $40,000 to whoever (whichever team) first reports the locations of ten weather balloons to be inflated December 5, around the U.S. Here is the announcement: DARPA Network Challenge.

Noam Nisan has some thoughts on this at AGT, and points out that very quickly some people started to offer to share the prize among those who would notify them of individual balloon's locations, conditional on the team formed in this way winning. Here's a wiki for people to share market design ideas on how to form a winning team.

Note that this is an aggregation of information problem a little like a prediction market, even though it is for postdiction rather than prediction...

Build your own prediction market

Build your own, using the platform at http://inklingmarkets.com/

Blackmail, legal and illegal

Reflecting on the recent Letterman case, the NY Times ponders The Art of Blackmail


Doing it on your own is illegal, but if you do much the same thing by threatening a lawsuit, it is legal.


"Blackmail is a “wonderfully curious offense,” to use the phrase of Paul H. Robinson, a professor at the University of Pennsylvania Law School and his coauthors in a recent paper. A threat to tell the truth is no crime, and neither is asking someone for money. But if you demand money to prevent the truth from being told, Professor Robinson said, you’ve crossed the line. At its core, he explained, the offense is “a form of wrongful coercion.” "


However you can threaten to sue if a settlement is not reached first, and that isn't blackmail.

"Those confrontations, however, did not cross the line into the criminal realm, he said, because they had been sanitized by lawyering. Attorneys, he noted, can create a legal filing that promises to bring out unpleasant facts in depositions or during trial; a settlement is not, technically, a payoff. He called it “wrapping an extortion threat in a legal cloak.”
It happens all the time, said Gerald B. Lefcourt, a criminal defense attorney in Manhattan. “Threatened lawsuits, and even filed lawsuits, are often no more than blackmail,” he said.

Compensating donors: how about bone marrow?

The National Law Journal reports: Cancer patients seek to overturn ban on paying for bone marrow

"Prohibiting someone from making money for donating an irreplaceable kidney is one thing. But what about donating bone marrow, which replenishes itself within weeks?

That question is at the heart of a new lawsuit, filed Monday, challenging the constitutionality of the federal law that prohibits compensating bone marrow donors. The plaintiffs want to make modest recompense for such donors legal — say, paying partial tuition for a college student or making a mortgage payment for a first-time home buyer.

In the lawsuit filed Oct. 26 in the U.S. District Court for the Central District of California, cancer and blood disease patients and health care advocates are suing U.S. Attorney General Eric Holder Jr. to enjoin enforcement of provisions of the National Organ Transplant Act of 1984 that criminalize compensating donors. They argue the statute violates due process rights and interferes with public health.

"This constitutional challenge is about an arbitrary law that criminalizes a promising effort to save lives," the complaint states. A bone marrow transplant is often the "only hope" for tens of thousands of Americans diagnosed with a deadly blood disease such as leukemia. "There is a desperate shortage of unrelated marrow donors, particularly for minorities," the complaint says.

Offering modest incentives to attract more donors could end that shortage, argued Jeff Rowes of the Arlington, Va.-based Institute for Justice, who is the lead attorney for the plaintiffs. "

Megan McArdle links to the Institute of Justice press release, and suggests that inclusion of bone marrow in the National Organ Transplant Act was simply a mistake.

A paper on bone marrow donation recently appeared in the American Economic Review, you can find an ungated version here: One Chance in a Million: Altruism and the Bone Marrow Registry
by Ted C. Bergstrom, Rod Garratt, and Damien Sheehan-Connor.

The paper argues that (because of the need for bone marrow matches to be perfect on the 6-vector of Human Leukocyte Antigens, and because of different distributions of these by race and ethnicity), we would get more bang for the buck by investing in recruiting more minority donors than additional random donors.

As it happens, for non-minority donors, the present policy in many places is just the opposite of compensating donors; if you want to register as a bone marrow donor you may have to pay the costs, presently around $65.

HT: Mary O'Keeffe and Steve Leider

Update, 11/4/09: Some comment on the legal theory of the case over at the Volokh Conspiracy, with a second and third post here and here and more to come...

Kidney exchange at the ASSET conference in Turkey

The annual meeting of the Association of Southern European Economic Theorists is meeting in Istanbul this weekend. Among other notable events (such as keynote talks by Andy Postlewaite and Muhamet Yıldız), there is a session today on Kidney Exchange. Below are links to the program (with links to all the papers) and to the kidney exchange papers.

ASSET 2009
Boğaziçi University, Istanbul
October 30-31, 2009
Conference Program


Saturday, October 31
S3.1: Kidney Exchange Room: WH 201Chair: Antonio Nicolò, University of Padua

Dynamic Analysis of Kidney Exchange Problems
Silvia Villa, Università Di Genova

Paired Kidney Donation and Listed Exchange
Özgür Yılmaz, Koç University

Pairwise Kidney Exchange with Age Based Preferences
Antonio Nicolò, University of Padua

HT: Bettina Klaus

Market design in science fiction

Stephen Weinberg, a well read economist at University of Albany (which I still think of as SUNY Albany), sends me the following email:

"I hope you're doing well. I've been greatly enjoying your mechanism design blog.

I'm not sure if you like science fiction, but if so, I thought you'd be amused to know that a recent scifi novel includes a plot point based around mechanism design. The novel is Eye of the Storm by John Ringo.

The basic gist is that, in previous books, the US had to create a humongous army to fight off an alien invasion. It then dropped down to only nominal force levels for a few decades (during which the ex-soldiers didn't age because of "rejuv" technology). Now they need to quickly create a new army, so to start with they've called up enough soldiers for a couple of divisions. The mechanism design part is that they decide to staff the divisions by letting officers use points to bid on their positions and subordinates. Some of the more talented officers decide to collude to game the system.

I've gone ahead and copied in the relevant chapters, in case you find it amusing. "

If I could have figured out how to create an "after the jump" break on this blogger I would have included the long, interesting excerpts Stephen included, which, among other things, had sniping in a combinatorial auction as a critical strategy.

The "Netflix for academic journals"

For those without comprehensive electronic access to journals through big university libraries, the Chronicle of Higher Ed reports The Netflix of Academic Journals Opens Shop

"By opening the largest online rental service for scientific, technical, and research journals, the company Deep Dyve is hoping to do for academic publications what Netflix has done for movies: make them easily accessible and inexpensive for everyone.
The Web site has been an academic-journal search engine since 2005 and unveiled its rental program this week. Now anyone can “rent” an article—which means you can view it on your computer without ownership rights or printing capabilities—for as little as 99 cents for 24 hours. Users can also subscribe for monthly passes. Currently the site has 30 million articles from various peer-reviewed journals.
William Park, chief executive of Deep Dyve, says the model will not only allow more people to read articles they might otherwise not see, but will actually encourage users to purchase more content from journals. He says that now, only about 0.2 percent of people visiting journal Web sites go on to buy articles, because they don’t know exactly what they are getting from just a title and an abstract.
“Nobody would buy a car without at least evaluating it first,” Mr. Park says. “The same is true for anything, whether it’s a dollar or $10,000.”
Mr. Park says that Deep Dyve has revenue-sharing partnerships with hundreds of publications (about 80 percent of which are scientific) and hopes to expand to more of the humanities within the coming months."

Forced Labor

A new book recently arrived in the mail: Forced Labor, Coercion and Exploitation in the Private Economy, edited by Beate Andrees and Patrick Belser of the UN's International Labour Office. Here is the executive summary.

The terms "debt bondage" and "bonded labor" appear to be terms of art for involuntary servitude in various forms.

The book is mostly about the developing world, although there is a chapter on "Trafficking for Forced Labor in Europe," concerning migrant workers. The book has no chapter on the United States (where newspaper reports about involuntary servitude mostly seem to focus on illegal immigrants caught up in forms of indentured servitude, and sometimes deal with prostitution). I would be glad if that is because the 13th Amendment to the U.S. constitution is largely effective:

"Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction."

Hours per week worked by (young) surgeons

In Britain as in the United States, there is considerable debate about the hours worked by physicians and surgeons, and what these mean for patient safety. Convincing data are lacking, but the Royal College of Surgeons of England has just weighed in with a new report, saying that limiting the hours of surgeons endangers patients: Patients are being harmed by working time limits, finds new study


The report argues that frequent handoffs allow patient information to be lost, as doctors have less chance to observe changes in a patient's condition.


"Surgeons across the country say patients are much less safe in the NHS since the August introduction of European Working Time Regulation (EWTR) 48 hour working limits as continuity of care for patient collapses, this is the damning assessment of a survey of NHS surgeons. Services are only being held together by a ‘grey market’ of doctors willing to covertly breaking the legislation to maintain care for patients."

..."The College surveyed 900 surgeons - almost an eighth of the UK surgical workforce – with responses from more than 360 consultants and more than 500 trainees to see how surgical services were faring under the new working time restrictions. It found some alarming results:
...
"A third say handover arrangements are inadequate in their hospital and 23 per cent say they cannot stay involved in all stages of individual patients clinical care that require their expertise."
...
"Patients are being lost and at increased risk of dying as a direct result of so many shift changeovers and rotas which leave no time available to handover. Trainee surgeons across the country are staying on unpaid after the hours limit because they want to see through care for patients. They are also taking on additional paid locum work in the hope of gaining the training opportunities they cannot get in their formal working week. Meanwhile hospitals are relying on this goodwill because they know they couldn’t stay open without them. As a result there is an emerging grey market in hospital cover with doctors true working hours being kept off the books."


On the other side is the argument that sleepy doctors endanger patients. We don't let airline pilots work long hours, why should the doctors who staff emergency rooms and operating rooms be different? In the United States, the 1984 death of Libby Zion led to new legislation in her name to limit the working hours of medical residents: A Life-Changing Case for Doctors in Training

College admissions in Illinois, conclusion?

U. of Illinois at Urbana-Champaign Chancellor Resigns in Wake of Admissions Scandal
Richard Herman, chancellor of the University of Illinois at Urbana-Champaign, has resigned in the wake of an admissions scandal in which well-connected applicants were put on a "clout list" and given preferential treatment, the Chicago Tribune reported on Tuesday. Mr. Herman, who made a remorseful apology to the faculty after a state panel found he was the "ultimate decision maker" for clout-listed applicants, will join the university's faculty. His resignation follows those of the university president last month and several trustees.

Roger Myerson and Paul Romer on designing nations and cities

Two emininent economists have been thinking about design on the largest of scales.

Roger Myerson thinks about nation building in general, and Iraq in particular, and reflects on the role of political leaders' reputations, for patronage among other things.

Paul Romer thinks about macro-market-design in the form of new "charter cities," to be modeled roughly on Hong Kong.

Here is Roger, in "A Field Manual for the Cradle of Civilization:Theory of Leadership and Lessons of Iraq, " Journal of Conflict ResolutionVolume 53 Number 3 June 2009 470-482. (HT Paul Milgrom)

"Agency incentive problems in government make patronage an essential aspect of statebuilding, and political leaders become fundamentally constrained by their reputations. Democratic competition requires many leaders to develop independent reputations for exercising power and patronage responsibly, which can be encouraged by political decentralization."

Roger then recounts Xenophon's description of the rise of Cyrus (Koresh), the Persian leader.

"The key to Cyrus’s success was his apparent love of justice, which was inculcated by his education and which enabled him to earn the trust and loyalty of a great army. But what kind of justice was it that Cyrus loved so much? It was certainly not justice for poor peasants, whose crops were gathered to support his conquering forces.
What Cyrus loved was justice for the soldiers who served his cause. Apparently Cyrus’s greatest pleasure in life was to judge the valor of troops in battle and to reward them richly for their accomplishments, asking nothing for himself. As a mechanic knows the names of his tools, Cyrus learned the names of all the captains in his army, so that each could be confident of his service being remembered. When everybody recognized Cyrus as the best leader to distribute their booty after a victory, he could take power, first over the multinational coalitional forces and, ultimately, over Asia."


Paul Romer, explains the idea of charter cities here, and in a Q&A at Freakonomics, here: Can “Charter Cities” Change the World? A Q&A With Paul Romer

He argues that to credibly move to better rules, you might have to do some things all at once and start fresh. (He suggests a good place to start would be to have a new Cuban city administered by Canada at Guantanamo Bay, to try to recreate the experience of Hong Kong.)

He too isn't afraid to think big:

"Q. It all sounds great as a theoretical exercise, but honestly, don’t your colleagues tell you that something like this will never happen?

A. They do say this, which is actually kind of ironic when you line it up with the other things they say. They recognize that the construct of a charter city is something that could make everyone better off. They admit that there is no technological or economic constraint that keeps us from building many of these. Then they say that for political reasons, it will never happen. They tell me that you can’t change politics; you can’t overcome nationalism; there is no way for countries to work together to extend the reach of good rules. Then these same economists suggest that we should just stick to business as usual. We should offer conventional economic advice and assume that political systems will naturally follow our advice when we point to something that could make everyone better off. But of course, they have already revealed that they don’t believe this. What’s going on here is a kind of self-censoring. Economists seem to think that we should propose things that are acceptable and that political systems will pursue, but that we should avoid proposing or even discussing things that are controversial or politically incorrect. I think we’d do our jobs better if we just said what’s true without trying to be amateur politicians. "

Romer and Myerson seem to have different views of where economics ends and politics begins.

Does a decrease in the number of traffic fatalities increase live kidney donation?

Over at Economic Logic, the Economic Logician reviews an article, The Effect of Traffic Safety Laws and Obesity Rates on Living Organ Donations by Jose Fernandez and Lisa Stohr. It finds that a decrease in availability of deceased donor organs (through an increase in helmet and seatbelt laws) elicits some increase in live donor kidney donation.

Here's the abstract, followed by EL's summary.

Abstract: This paper uses variation in traffic safety laws and obesity rates to identify substitution patterns between living and cadaveric kidney donors. Using panel data from 1988-2008, we find that a 1% decrease in the supply of cadaveric donors per 100,000 increases the supply of living donors per 100,000 by .7%. With respect to traffic safety laws, a national adoption of partial helmet laws is estimated to decrease cadaveric donors by 6%, but leads to a 4.2% increase in the number of living donors, or a net effect of 1.8% decrease in the supply of kidney donations. The recent rise in obesity rates is estimated to increase living donor rates by roughly 18%. Lastly, we find evidence that increases in disposable income per capita is associated with an increase in the number of non-biological living donors within a state, but is not found to have an effect on biological donor rates.

And here is EL's summary:

"There are times where you really wonder why authors would even think that some variables could be correlated and how they then come up with a story that can explain this statistical relationship coming from seemingly nowhere. The paper by Jose Fernandez and Lisa Stohr is one of these.To quote their abstract, "this paper uses variation in traffic safety laws and obesity rates to identify substitution patterns between living and cadaveric kidney donors." Despite reading this sentence ten times, I could not make any theoretical sense of it. But reading through the paper, a good story can be made. Tightening traffic safety laws reduces the number of fatalities, and thus the number of cadaveric organ donors. An increase in obesity increases the demand for organs, in particular kidneys. Thus one can instrument for supply and demand using these measures. With this in mond, one can then study how variations in the supply of supply of cadaveric organs (which are of poor value) and demand can motivate living donors to come forward, as they trade off the usefulness of their donation with the personal harm it will inflict upon them. Fernandez and Stohr fiand that donors respond indeed to cadaveric supply and to the increase in demand due to obesity."

Markets for body parts, continued

While it's illegal to buy or sell organs for treatment, there's a legal market for "tissues" such as bone. But it's still fenced in with lots of repugnance. As with solid organs, the issue of "objectification" (or "commodification") of the body is a big issue, which bears on who may be compensated for what, among other things..

Inside a Creepy Global Body Parts Business

"According to the American Academy of Orthopedic Surgeons, more than a million bone parts are used in transplants every year. In no other country is it possible to make so much money with body parts. If a body were disassembled into its individual parts, then processed and sold, the total proceeds could amount to $250,000 (€176,000). For a single corpse! The US tissue industry generates total revenues of about $1 billion a year, says journalist Martina Keller, a co-author of this article and the author of the German book, "Cannibalized: The Human Corpse as a Resource." "
...

"Should corpses be butchered to make cosmetic procedures possible? Ingrid Schneider is decidedly opposed to the practice. For the past 15 years the Hamburg political scientist, a former member of the Investigative Commission on Law and Ethics in Modern Medicine in the German parliament, has been involved in the subject of recycling body substances. Schneider argues that the body is not a source of raw materials that can be sold at will. Given such concerns, it is not surprising that many people are deeply opposed to allowing the body of a family member to be reused, even for medical purposes.
Even if it is unrealistic to expect that all commercialization of the body could be ruled out in modern medicine, says Schneider, it is important to set boundaries. For that reason, she insists that human tissue ought to be used sparingly -- that is, only when such use is medically necessary and clearly superior to other forms of treatment.
The conviction that the body is much more than an object has also shaped the policies of the World Health Organization (WHO), the European Parliament and the European Council, the EU's body representing the leaders and ministers of the 27-member bloc. All of these bodies condemn the practice of trading in human body parts to turn a profit.
In Germany, the country's organ transplant act regulates the removal of tissue. Only those who have consented to organ and tissue harvesting are considered as donors. If a person dies and is not already a donor, his or her closest relatives can consent to donation. Paragraph 17 of the transplant act explicitly states: "Trading in organs or tissue intended for use in the medical treatment of others is prohibited." Physicians who remove tissue can only be paid suitable compensation for their efforts. The law calls for prison sentences of up to five years for violation of the trading prohibition."

Right to die in England

There has been some interim resolution of the continued debate in England about whether those who assist a terminally ill relative who wishes to commit suicide, in particular by accompanying them to a clinic in Switzerland, will face prosecution. The current resolution is, it's still illegal, but guidelines have been issued to give some legal safety.
Campaigners win the fight to legalise assisted suicide
Assisted suicide investigations will focus on who stood to benefit

"People who stand to benefit financially from a person’s death are likely to be the ones prosecuted for assisting a suicide, under guidelines to be issued this week. "...

"The policy...will aim to clarify when individuals are more likely to be prosecuted or more likely not to be, he said.
Mr Starmer told the Andrew Marr Show on BBC One that such factors will include whether the person has a clear and settled intention to commit suicide, whether they have been encouraged or just assisted to do so, and whether those helping them have anything to gain from their death."

..."As many as 115 people from Britain have gone to Dignitas, the Swiss clinic, to die, but no one has been prosecuted so far. Last month Mr Starmer said that the landmark guidelines would apply in the UK as well as overseas.
Under current legislation, those who “aid, abet, counsel or procure” someone else’s suicide can be prosecuted and jailed for up to 14 years. Ms Purdy, from Undercliffe in Bradford, West Yorkshire, wants to know what would happen to her Cuban husband, Omar Puente, if he helped her to travel abroad to end her life. She took her case to the Lords after the High Court and Court of Appeal held that it was for Parliament, not the courts, to change the law.
The Lords agreed that changes were a matter for Parliament, but upheld Ms Purdy’s argument that the DPP should put in writing the factors he regarded as relevant in deciding whether or not to prosecute."

The guidelines, which were issued on schedule, drew a predictably wide range of reactions, some of which can be found at the end of this story in the Times: Assisted suicide guidelines do not give immunity against prosecution, says DPP