MTG Salvation

There are some things our central banks can’t, or shouldn’t, do. They can’t go around experimenting with monetary policy because the consequences would be disastrous (“Hey Ben, what do you think would happen to China if we increased our money supply by a trillion dollars?”). And in sociology, Philip Zimbardo’s famous (or infamous?) Stanford prison experiment and Stanley Milgram’s psychological “obedience to authority” experiment drew accusations of unethical behaviour for possibly causing lasting harm to participants. Virtual or artificial worlds afford us opportunities which we could not normally take advantage of in the real world.

Second Life is a pretty well known “game” by now. I put “game” in quotation marks since it really is more like a second life, or at least a significant extension of one's first life. Its in-game freedom enables players to simulate real life actions, modelling the real world, and giving us more data for analysis – much like creating a whole new country from scratch.

Of course, there’s a key element which makes this information meaningful: realism. Realism does not come only from the ability to perform a wide range of actions, but also from the personal importance given to a situation. After all, actions speak louder than words. This importance can arise in a couple of ways.

First, there is money. As poker players know, playing with fake money and playing with real money are very different. The Second Life currency of Linden Dollars can be changed into US Dollars. This means that when Linden Dollars are at stake, your money is at stake. Meaningful information is revealed through these Second Life actions. (Furthermore, since Linden Dollars are subject to supply and demand in the same system as real world currencies, we can gather data on effects on the currency itself.)

Alternatively, emotional attachment can make decisions important. Even if money isn’t directly at stake, we still try to get the most happiness possible out of our resources. And if I might say, gamers are pretty likely to become personally invested in such games. Remember that markets arise out of the idea that we’re trying to get the most happiness we can, and that money is really just a representation of resources, so these two possibilities aren’t that independent.

Second Life is particularly interesting because virtually all of its institutions have come from its residents, much like how markets are created in the real world. Many organizations are involved in not only this virtual world, but many others. EVE Online even hired an economist to gather information about their economy!

As the article suggests, in virtual worlds we can make experimental-type tweaks to see the results, which we could not do in the real world because of the magnitude of effects. While masses of people could lose their jobs due to bad central bank policies, a micro-economy like that of Second Life stands to lose relatively little (although the makers of Second Life aren't going to try and collapse their economy any time soon).

Economists dealing with macroeconomic issues could profit especially. Macroeconomics is notably problematic when distinguishing correlation, causation, and coincidence; a smaller and more transparent economy would help immensely. We could analyze changes in, say, the money supply, and try to figure out the effects on the Linden Dollar’s exchange rate in order to confirm or refute a hypothesis.

The information gained would be a boon to economics, and when applied to the real world, we could cultivate all sorts of wealth. Cool, huh?

Join me next time when I talk about a Seattle school’s Lego society.
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Karl Smith shows that implementing free trade can be undesirable even for everyone in a given country.

The usual analysis of trade concludes, correctly, that the gains from trade outweigh the losses. However, gains and losses aren’t evenly distributed. Because there is uncertainty, gains are valued differently than face value. If you had $10 000 in a game show, would you trade it for a 50% chance of getting $20 000? Or would it take maybe $21, 22, 23 000 to induce you to gamble?

The desirability of such situations boils down to risk-seeking versus risk-aversion. If somebody is risk-averse enough, his expected benefits from trade can be decreased enough such that they are lower than his expected losses. And if everybody in a given country were risk-averse enough, the whole country wouldn’t want to drop protectionist policies.

It seems like something that should have already been figured, but oh well. It isn’t particularly significant as an argument against free trade to me (and the author doesn't intend it that way). The usual measures of economic efficiency break down when dealing with rights; a slave-owning society would be Pareto efficient, since you couldn’t make the slaves better off without hindering the slave-owners, but obviously it would be a gross transgression of morality. Not to mention, the condition is quite unlikely to be fulfilled. Still, it’s an interesting point.
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Should 'Scarcity' Be Part of the Definition of Economics?

Let’s take a look.

Michael Mandel’s proposed definition is that

Economics is the study of the functioning–and malfunctioning–of the economy, with the aim of improving living standards

My justification for a different definition is that there are big chunks of the economy where scarcity is not important, in any but a formal sense. If anything we seem to have an abundance of food and manufactured goods, and the cost of moving and manipulating information has fallen very very sharply. I'd also like to get in the sense that economics has a purpose.

How does Mandel’s argument come across?

First of all, his definition falls flat because of its circularity; economics is the study of the economy – what’s the economy? The sum of economic action…which is…the economy? It is this view of economics which impedes the public’s understanding of what economics really is, in my opinion; everybody talks about the economy without knowing what it actually is. Second, for economics to be a science, it should not claim any “goal” other than that of any other science: to understand and gain knowledge about the subject. Biology does not have such a “goal” of “improving lives”, although biologists may have this in mind and might employ biology to this end. As for his notion about the “abundance of food”, he’ll have a point when food and goods cost absolutely nothing – not money, not energy, not time.

Why is “scarcity” constantly mentioned when dealing with economic basics? What is it about “scarcity” that seems to tie things together so well? It’s that the idea of “scarcity” implicitly contains certain concepts which are central to economics.

A scarce good is different from a rare good. Ebola is rare, but it isn’t scarce, because nobody wants it (barring perhaps a few ambitious virology researchers). What hidden concept do we glean from this distinction? We find the notion of value. Something is worth some amount – and this further intimates the existence of a somebody, an agent, to whom it is valued. If we keep going, we reach a final destination of sorts: the presence of a goal. And of course, resources must be finite because any infinitely available resource would not have to be managed, and it would have a value of 0.

However, this could be a misleading way of finding the key point. Usually, economics deals with humans and their usage of resources; for this reason did Mises consider economics to be centered on human action. But humans aren’t required – no such rational agents are required, and goals don’t even have to be held in some creature’s mind. Evolutionary game theory involves the goal of fitness (ie. survival and reproduction), but no bacterium ever thought about it. The agents of EGT include such units as genes and even the simplest of gene-like structures that ever existed, let alone full organisms.

We know that economics is about resources and how they are used or distributed, and how agents act as a result of these dynamics, in the same way that we can say biology “examines the structure, function, growth, origin, evolution, and distribution of living things both past and present” (thanks Wikipedia). It is because these statements link back to the key implications of goals and finite resources that we talk about scarcity.

In a universe completely barren of life (or consciousness), there would be no goals, and economics would be meaningless. In a universe of infinite resources, there would be no rarity, and economics would be meaningless. Scarcity is the intersection of goals and finite resources, and for this reason is it the underlying basis of economics.
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I’ve been wondering about environmental economics recently and about air pollution in particular. I used to follow the traditional notion that Pigouvian taxes or carbon trading credits should be used to respond to pollution. Then I came across this article.

Some background is helpful here (I hope this doesn’t feel like you’re wading through jargon). Neoclassical economics is the school of economic thought that is currently mainstream and is taught in high schools and universities. It views economic agents as trying to optimize net benefits subject to whatever constraint exist; for example, individuals (rational and informed) attempt to maximize their utility (the satisfaction they derive from consuming goods and services) and businesses attempt to maximize profits from their scarce resources.

Remember that economic efficiency is the useful output in relation to the total input. Under the neoclassical paradigm, a system is considered to be “economically efficient” when those who place the most value on a good (or service) and are able to pay do obtain that good. “Market failures” are considered to be instances of economic inefficiency, and as Wikipedia notes, they result from imperfect competition, externalities, significant transaction costs, or poorly defined property rights.

Externalities are the effects of economic activities on parties other than those directly involved, such as with pollution. The trouble with externalities can come from prohibitive transaction costs or problems with property rights. Ronald Coase won the 1991 Nobel Prize in Economics for the Coase theorem which states that in the absence of transaction costs, as long as there are well defined property rights regardless of who owns what, the same (“efficient”) outcome will arise (although who is paying will change). Of course, transaction costs are unavoidable, and resources cannot always be divided into private property – this last point is at the crux of the air pollution matter.

To resolve such issues of negative externalities, the traditional analysis suggests government policies of Pigouvian taxes, taxes that are levied on “socially undesirable” effects, such as a tax on pollution or on cigarettes. The idea is that there is a private cost and a different social cost to production (or consumption – it depends on where the externality comes from), which results in aggregate supply or demand curves and market equilibriums that don’t reflect the “socially optimal” levels of, say, cigarette smoke and CFCs; taxes are supposed to change the price of the good in order to shift quantities demanded to their “socially optimal” levels.

Now, the Austrian school of economics is a somewhat distinct beast. The Austrian methodology is centered on what Ludwig von Mises called “praxeology”, which is “the study of human action”. Consequently, it is focused on the individual, since only individuals act, and it looks at how individual plans interact to form much more complex structures to bring individuals closer to their goals. Austrians then decry the use of most statistics in economics, arguing that they are misleading and not truly representative of what they are alleged to represent; most Austrian models and theories will exclude math and rely instead on logic and reasoning. Due to its core of methodological individualism and subjectivism (individuals have their own subjective values), the Austrian school is associated with libertarianism (or “classic liberalism”). It is arguably the points in these last two sentences which have led most mainstream economists to relegate the Austrian school to the sidelines; undeniably, though, the Austrians have made significant contributions to the field of economics.

Since Austrians consider satisfaction and utility to be subjective and individual, they consider aggregating utility to be erroneous. From this viewpoint, seeking a “socially optimal” level of pollution is invalid, and thus so is the use of Pigouvian taxes. Cordato, the author of the article, contends that the neoclassical perspective forgets that costs are subjective and individual, and consequently mistakenly disembodies costs from individuals, rendering such an analysis meaningless. From an Austrian perspective, Cordato argues that pollution should be looked at in terms of interpersonal conflict and property rights, and public policy should reflect this: two people intend upon conflicting uses for the same resource – how can this be resolved?

Usually property rights determine who gets to use the resource. But what about those resources which can’t be divided into private property? Water is free-spirited, but remains somewhat limited; air, however, confounds attempts to divide or limit it. Pollution is dispersed throughout the air, which blows all around the world, spreading effluence to tons of people and places, aggregating some pollution at the poles (cf. ozone layer). It is an absurd affair to figure out how much of each type of pollutant each person has breathed in, and generally an even more Sisyphean task to find out where a given amount came from. The article unfortunately leaves us hanging on how to deal with issues involving such shaky property rights.

Personally, I’m concerned about cigarette smoke. Is it my right to have smoke-free air? Does the other person have a right to smoke? Or rather, how do we reconcile our individual rights to liberty which doesn’t harm others’ rights? Also remember that since valuations are subjective, smoky air might be a good to some other person, though a bad to me. Ultimately the question is, how do we decide what the air can be used for? Of course, air is non-exclusionary – that is, you can’t really exclude someone from using the air. (At least, in certain capacities you can’t, like with breathing.)

It seems unjust to me that somebody else’s smoking is harming me. Yet, they have a claim to the air. And we don’t ban bad breath. However, I have a claim to the air as well. Somebody can’t release a terrible airborne virus (which would be akin to some seriously bad pollutant) legitimately. Is there some level of harm at which substances should be deemed pollutants and regulated? Is simple social discouragement all that remains for other things? The "polluter pays" principle only seems just.

The only thing, it seems, is to ban pollution in public places. And a simple ban on polluting (eg. smoking) in public places would not be enough – it must be a ban on pollutants in public places, by the nature of airborne pollutants. This entails regulations on what might be done on private property (requiring that pollutants are not ejected onto public property), which is an unfortunate road to tread. But this would entail, for instance, no vehicles being used and factories unable to produce...disastrous consequences.

What’s to be done?



If you read this far, enjoy a hilarious, or perhaps terrible, video asking “What is Capitalism?” wherein several random people are asked just that. I swear, it got to the guy in the middle saying “people can … trade things that don’t even exist, so in the end it’s all, like, about trading these value[sic], you know, these symbols of things that don’t exist,” and in my head I was thinking, “capitalism is not something you just dump something on. It's not a truck. It's a series of tubes.” Sigh. Then a lady was turning capitalism into some kind of RPG, what with the “levelling up”. Bill Gates must have done some serious grinding. But apparently you can “keep going forever just accumulating stuff”, so WoW players might want to stay away from capitalism.

Shiraishi Minoru Theater is ******* win.



http://www.youtube.com/watch?v=SuwHwTuk0Uk

RPGs and animes often suffer from a lack of creativity when it comes to mechanisms for building the main characters' power. Power increases frequently arise from "training" of some sort, which is usually fighting in a vaguely defined or clichéd manner; Dragonball Z is of course the poster child for this monotonous method. When it comes to RPGs, the consequences of this leveling-up style earn a spot being ridiculed on The Grand List Of Console Role Playing Game Clichés:

26. Local Control Rule
Although the boss monster terrorizing the first city in the game is less powerful than the non-boss monsters that are only casual nuisances to cities later in the game, nobody from the first city ever thinks of hiring a few mercenaries from the later cities to kill the monster.

And why doesn't the ultimate villain just send some average soldiers from the end of the game to take the hero out of commission early on? In DBZ, villains are forced up to the next level with ballooning power levels as the series goes on, so much so that Akira Toriyama (the creator of DBZ) ended up simply pulling Buu out of a can.

Eiichiro Oda breaks out of this mold with One Piece. Using the Devil Fruits allows for a nice range of abilities, and Luffy's rubber body is a perfect easel for Oda's creativity. A rubber body seems like a mediocre ability at first, allowing one to maybe be immune to punches; certainly it's not as overtly powerful as Enel's control of lightning or Ace's fire abilities. But Luffy creates moves uniquely based on his rubber body, and this is how Oda shines. Starting off with simpler moves like his rubber pistol and bazooka, Luffy progresses to Gear Second and Gear Third. Instead of mindless training, Luffy exploits his rubber-ness to create new moves which justify his power increases.

Furthermore, Usopp and Nami are completely devoid of the "monstrous fighting abilities" of the rest of the crew, a point explicitly stated by Nami, though admittedly, Usopp's sharpshooting skills could be considered abnormally strong. Still, Usopp relies on cleverness and trickery for which he sometimes employs his shooting skills, as demonstrated when he burns Luffy's vest in the fight against Miss Goldenweek. Similarly, Nami uses her intelligence (and Usopp's inventiveness) to fight and help out.

As for the issue of "sending powerful enemies from the end to the beginning", this is easily explained by the world situation in One Piece; there isn't a final villain as such, and power is spread among the government and pirates (who are even more divided). And since Luffy starts off in East Blue and journeys towards the end of the Grand Line, it makes sense that he encounters weaker enemies near the beginning and much tougher enemies as he progresses.

Ultimately, Oda has created a series which allows for great originality and creativity, and he exploits this to the delight of his audience. (He's also a really funny guy.)