Overbetting Longshots

HT: Andrew Gelman (link to the ref here)

we find evidence in favor of the view that misperceptions of probability drive the favorite-longshot bias, as suggested by Prospect Theory

I.e. it's not a love of risk in the utility functions of gamblers, it's statistical illiteracy. They can't figure out that a 29:1 longshot has at best a 1/30 probability of winning (if the odds are "fair").
One problem I have is that, to Gelman and others this research contradicts theories of rational choice. Not so. It suggests that people are either (a) poorly informed; or (b) process information poorly. To quote a Larry Summers finance paper, “THERE ARE IDIOTS. Look around.”
Go Chiefs!

Line of the day

From a story in the Post on the decline of grass-fed cattle in
Argentina and the rise of feedlots. One argument against feedlots is
that it is unnatural. The other side:

"What's natural is for a cow to grow, to reproduce and to die."

Fun stuff.

Stumbling Blocks or Building Blocks

While bilateral trade deals are increasing trade amongst countries in regions with lots of bilateral deals has not. Furthermore,

Countries may worry that a multilateral deal would erode the preferential terms they got through bilateral ones. If so, the flurry of bilateral deals may have come at the expense of a world trade agreement. Gary Hufbauer of the Peterson Institute of International Economics in Washington, DC, thinks that China and India have decided they would “rather pursue bilateral FTAs than make the necessary concessions to push Doha across the finish line.”

This is more disturbing than any specific national protectionist policies because it undermines the WTO, the MFN principle, and multilateralism.

Links

Teacher Pay in the US vs. Elsewhere
Choosing Checkout Lines
Failing Colleges, and Responses

NFL Rankings

by Me.

1. 1.Titans
2. 2.Vikings
3. 3.Steelers
4. 4.Saints
5. 5.Giants
6. 6.Chargers
7. 7.Patriots
8. 8.Colts
9. 9.Falcons
10. 10.Texans
11. 11.Bears
12. 12.Eagles
13. 13.Dolphins
14. 14.Packers
15. 15.Buccaneers
16. 16.Jaguars
17. 17.Cardinals
18. 18.Panthers
19. 19.Cowboys
20. 20.Redskins
21. 21.49ers
22. 22.Ravens
23. 23.Bills
24. 24.Seahawks
25. 25.Bengals
26. 26.Broncos
27. 27.Jets
28. 28.Rams
29. 29.Chiefs
30. 30.Browns
31. 31.Lions
32. 32.Raiders

Don't hold me to this. I figure if I set the bar low for the Chiefs, they are unlikely to disappoint.

The office kid

Markets in everything via MR: The office kid. It's an idea sprung by office workers thinking they were getting screwed into more work by people with kids (who were always having to leave for kid-related problems). The idea was to have a fake kid so you could get your share of paid time out of the office.

I have a better idea. Instead of cooking up a scam, organize the market so the single workers get paid to "take their turn" getting "time off" for dealing with their coworkers' kid-related problems.

Our Portfolio of Imperfect Institutions

Markets, nonmarket institutions, and governments. From Economix:

First, a large share of our economic output is now produced by large companies whose sales exceed the gross domestic product of many countries of the world. The vertically integrated supply chains of these large, often bureaucratic institutions seldom involve markets....

Second, market output represents a subset of total economic output. ...time and energy to caring for ourselves, our families and our friends ... activities that improve our own living standards ... men now devote more time to housework and child care than they once did. As we move toward more equitable sharing of unpaid work, policies designed to help wage earners meet their family responsibilities ... seem expensive to us in part because we have taken women’s unpaid work for granted in the past.

Third, the present and future costs of environmental degradation are on the rise.

Markets aren’t the only imperfect institutions in our world. Governments, families and Mother Nature are also susceptible to failure.

The point is, like it or not, we rely on a portfolio of imperfect institutions — a mixed economy.

Silly Anti-Reagan Conservative Health Care Protesters

From MR via The Beacon. Just say no.

More Economist Humor

This came via Phil at Market Power:

Reminds me of the old Woody Allen line, "Those who can't do, teach. Those who can't teach teach gym."

Sentence of the Day

Tyler Cowen, answering the question, "What is Conservatism?"

Responsibility is a more important value than either liberty or equality.

The whole post is worth reading but that point (the last) is the keenest.