Preston McAfee @mcafee@qoto.org
- Website
- https://mcafee.cc/
- Resume
- https://vita.mcafee.cc/
Joined Nov 2022
Insurance is not inefficient. Let me give an example. I hike and usually need one liter of water. But sometimes, say 10% of my hikes, I'm really thirsty and want a second liter very much. So I always carry two. What I've done is insure against my thirst. Provided the extra value -- which is zero 90% of the time -- is greater than the cost of carrying the water, it is efficient to insure.
You have to do the net present value calculation.
Obviously if could perfectly predict my thirst, I would not need to insure. But we don't live in a world of perfect prediction.
This doesn't represent very good economic analysis. A price-taking, expected-profit-maximizing firm, faced with price uncertainty, behaves in a way that is socially efficient and in particular does not minimize likely cost as your reference seems to suggest. That is, it is completely false that "mitigating risk requires inefficiencies" for precisely the same reason that buying insurance can be, and often is, efficient and rational. Buying insurance that you don't end up using does not mean you made an ex ante mistake. It is not efficient to stock more than you will *ever* need, but efficient to stock more than the minimum you will need, and expected profit maximization leads one to do exactly that.
So if markets are producing a lack of resilience -- and they are -- is it not markets directly that are doing it, but some problem with (1) price taking (e.g. market power) or (2) expected profit maximization. Market power doesn't, to my knowledge, suggest an underinvestment in risk mitigation, so while that might be a reason, it isn't a slam dunk, and might go the other way. There are lots of reasons why firms might not maximize expected profit -- executives and their boards are short-run focused would be a plausible example; rewards to firms are asymmetric so that firms wind up being risk loving. That is, it is not markets, but market imperfections, that lead to a lack of resilience.
The use of Crypto for purchases of goods and services seems negligible. As a result, the price of houses and pork bellies denominated in dollars (and as Panegyr noted, the number of dollars didn't change) shouldn't directly be influenced by the price of crypto. In this view -- and I'm not a macro/finance guy so take with a grain of salt -- a high price of crypto works like the stock market, making people feel wealthier and hence willing to spend more aggressively, and not a "more or fewer dollars chasing goods" perspective that counting crypto in the money supply would suggest. It has been possible to buy a few goods with crypto -- I recall seeing coffee for sale with BTC in Seoul around 2016 -- but the use of crypto as money must have been negligible. As a result, the main effect of the evaporation of crypto value is in making people feel less wealthy.
Indeed, to argue this perspective in a different way, if crypto is to be counted in the money supply (and I think it basically should not), general equilibrium says that a change in its price is just a change in exchange rates. No one thinks that the fall in the British pound is a significant contributor to US inflation; indeed if anything the effect goes the opposite way: the fall in the pound reduces demand for US goods and services, tending to reduce US prices.
Not to mention that this problem makes more sense as a complex variables problem and the answer seems to assume real.
Here is a related question: which is bigger, e^Pi or Pi^e?
Answer is interesting: max x^y s.t. x*y=constant, and x=e no matter what the constant.
And vice versa! Although I'm here purely as an experiment -- I wasn't on either FB or Twitter, finding the return on time investment too low, or even negative in the case of FB.
Take points (x,0,0), (0,y,0) and (0, 0, z), x,y,z all positive. Consider the areas of the three triangles defined by a pairsl of these points and the origin. Now consider the triangle B defined by (x,0,0), (0,y,0) and (0, 0, z). The sum of squared areas of the three sides equals the square of the area of B. Indeed the Pythagorean theorem works in any dimension!
Preston McAfee
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Al Roth just sent a discipline-wide email telling all theorists they have till 5pm tomorrow to decide if they're ready to go ‘hardcore for the core’ or deviate as a singleton.
Preston McAfee
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Hi #EconTwitter!
Are you interested in/involved with rankings of #economics journals? Have a look at the latest version of this interesting paper by Ham, Wright and @Ziqiu_Ye
https://ap5.fas.nus.edu.sg/fass/ecsjkdw/theriseofnewjournals_20221009.pdf
Preston McAfee
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I suspect, if Usenet and email are any indication, that over time ActivityPub will wind up aggregating users into large servers that have bulk optimized peering protocols, and locally optimized timeline generation. It’ll be cheaper to move everything to a few places and sort it out locally as opposed to having to peer with everyone which is what @aral is afraid of https://ar.al/2022/11/09/is-the-fediverse-about-to-get-fryed-or-why-every-toot-is-also-a-potential-denial-of-service-attack/
Preston McAfee
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Almost 180k new users joined #mastodon yesterday, a new record. This third #twitterMigration wave happened after Musk's Twitter 2.0 ultimatum to #Twitter workers. Each wave is stronger than the previous one. Here is my updated plot showing the three consecutive waves.
Preston McAfee
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The Mark Nerlove papers are now open for research
https://blogs.library.duke.edu/rubenstein/2022/11/17/marc-l-nerlove-papers-open-for-research/
This archive is located at Duke, part of Economist's paper project
New data for those writing on the history of agricultural economics and econometrics!
Below is a letter from John Nash to Nerlove
An interesting take on Mastodon, claiming it intentionally attenuates virality and introduces frictions to negativity:
https://uxdesign.cc/mastodon-is-antiviral-design-42f090ab8d51
Preston McAfee
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The Mathematical Sciences Research Institute, located at Berkeley, is sponsoring a program on Mechanism Design featuring leading economists and computer scientists. Applications close Dec 1, 2022.
Preston McAfee
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@mcafee yup!
We were camping nearby.
@groundie Joshua Tree?
Does your enthusiasm extend to a 2024 Biden run?
The Mathematical Sciences Research Institute, located at Berkeley, is sponsoring a program on Mechanism Design featuring leading economists and computer scientists. Applications close Dec 1, 2022.
