Archive for April, 2007

World of Warcraft and RMT

April 16, 2007

I have been researching the Real Money Trade with respect to the MMO World of Warcraft for about 8 months now.  I will try to post the current draft of the resulting paper in the near future.  Today, I read this entry at PlayNoEvil about a recent problem of hacking in World of Warcraft accounts.  Further down is a summary of an article (the text of which, I admit, I have not read), by a Prof. Castronova, an economist who has written much of the seminal work in the field of RMT, including the description of  simple demand model for RMT. 

Personally, I am somewhat turned off by Castronova’s incessant diatribes against RMT, especially as a (fledgling, a.k.a undergrad) economist.  Simply renouncing RMT does not provide any new information that game companies may use to combat it, and invoking government intervention is a cardinal sin of economics of the first degree.  I think economists and game companies interested in RMT need to research the incentives that gamers face with respect to RMT, and use the resultant models to devise solutions that are both effective and cheap to implement.  Supposing that we see RMT as a the result of a failure of a game to fully enclose players in its Magic Circle, then the demand for RMT might ultimately be chalked up to game design flaws, not the incursion of cheating, criminal elements.  The impetus is then on the game company to improve/innovate in their games, instead of on the government to devise and impose more laws and create more waste. 

I’ll write about this again if I can get a chance to read the text of the actual article.


The Burden of Language: An Informal Experiment, Part 1

April 16, 2007

Last Sunday, my girlfriend Falyn and I were sitting at a Barnes & Noble bookstore drinking coffee and having one of those really good conversations that reaffirm your decision to date your significant other.  The topic was language, and especially the English language, which surpasses all others in sheer quantity of words.  I suggested that we look at language as a schematism between individual human beings (I use the individual as a unity of analysis simply as a heuristic for my purposes).  In that case, language is an imperfect tool that humans use to represent individuated realites to one another.  We take the various accounts and combine them in our minds to further enhance and hybridize those individuated realites.  The tool is imperfect because each perspective is unique, but obviously we share many similar frames of reference, and those frames adapt to our particular situations (the reason, for instance, economists can understand one another – they share a particular paradigm and set of problems and methods and educational backgrounds; the same is true not just for other professions, but subcultures, families, and other groups). 

Still, it is imperfect because it takes time to communicate something, and if, say, I am an economist and you are an anthropologist (a real-life situation in my research), the lack of a terminology and similar vantage point makes communication exceptionally difficult.  To counter this (and for many many other reasons), I suggested to Falyn, is the reason the English language has become so enormous.  Increasing specialization, the need to subsume several ideas under a more general and abstract term, are one source of the increasing size.  Another, I continued, could be that language size literally feeds off of itself.  The bigger the language the larger and more cumbersome it gets – the more we need new words to say just what we mean.  This could also be the result of such an extreme individuality – and a certain level of self-importance – that we think our life-experiences require a broader and broader vocabularly in order to attain complete expression (going back to my above hypothesis of language as schematism).

Of course, by this point I was doing no more than speculating.  But Falyn proposed the following experiment:  Let’s just not talk to each other from now until… we decide to start talking again.  I thought it was a cool idea, and I agreed.  Before starting, we decided to go to Ruby Tuesday’s across the street.  We left the bookstore in silence, walked to Ruby Tuesday’s, and spoke only when being seated and waited on.  We both got the salad bar and a beer, and sat in silence.  After about 40 minutes of silence, we finally decided to end our experiment. 

Most profound to me was an event that occurred the moment we walked out of the bookstore.  It was chilly out and I was about to comment on that fact, but of course I couldn’t.  I just looked over at Falyn and continued walking.  After that even I admit I was consumed by the following question:

Why did I feel so compelled to mention the weather to Falyn?

First answer:  Social nicety. 

I rejected this option.  Too shallow. 

Second answer:  Concern for Falyn.

Rejected.  She had a jacket, she was fine, it was a short walk.

Third answer:  Desire to share my discomfort.

Rejected also, but getting warmer.

Fourth answer: Need to affirm that Falyn is experiencing what I am experiencing.

Now we’re getting somewhere!!!

To be continued….

The Self and Othering

April 12, 2007

In my first post about critical economics, the first paragraph related to the workability or testability of new theories.  Economics as a social science is concerned with reducing observed phenomena to a general, testable theory.  The advantage economists feel they have over other social sciences is that what the propose can be empirically measured, usually in money terms, but over the years other objectively applicable units have been devised.  Case in point are the development of indexes of institutional quality or corruption, which while rife with difficulties, are nonetheless big steps in the right direction. 

In general, however, economic measurements – expressed or implied – are proxies for utility – the amount of happiness that an action or commodity or service supplies to someone.  And in general, we say that choices are made at the margin, where the actor determines the extra (marginal) benefit or cost that attend an action.  If the benefits outweigh the costs, the action is taken.  To complicate matters, new institutionalist economists have brought in the idea of transaction costs, which are the costs that attend actually creating an environment in which a desired choice can be made.

One of the major problems with this type of analysis is not that it uses utility (based on a rather outdated moral system, chosen for its theoretical quantifiability, rather than for its reflection of reality), or even that it assumes people identify and weigh costs and benefits.  At some point, as I said in my post, whether we are the actor or the economist studying the actor, we must stop gathering data and make reasonable hypotheses about the best course of action.  Infinite time spent gathering data is infinitely costly.  No, this is not the problem; rather, it is the source of the explanatory power of economics.

Instead, I believe that the problem is that the actor of economic theory is always the individual.  I think that the individual should taken out of the center of the universe and replaced by the more generalized concept of the self.  The self, as I understand anthropological theory, is defined by a process of “othering.”  We do not define out selves, but rather our selves exist as logical consequence of who we say we are not.  For example, I am not a member of any family but the Knowles family.  I am not Chinese or Bolivian, I am American (recognizing that even that statement is not rife with difficulties).  I am not you, or you over there, I am me.  All these different definitions of who I am – American, Knowles, the “I”, even white, middle class, etc. – enter into my decision calculus.

Allowing that we do weigh costs and benefits, does it not seem that we find ourselves weighing the costs and benefits not only to ourselves as individuals, but also as members of a particular family, or nation, or race or class?  Statistically, we will act in similar ways as the group(s) to which we belong.  So what if the choice one aspect of the self would make runs in contradiction with the choice the other aspect of self would make?  How do we decide which way to go?

In the past 30 years or so, neoclassical microeconomists have devised a number of ways to account for how we act, by developing models of altruism, social capital and opprobrium, and coordination problems.  These solutions can get very complex.  What if, instead of developing a series of post scripts to apologize for using the individual as the unit of analysis, economists were to understand choice calculi as multiple cost/benefit analyses with respect to each definition of self, weighted by the level to which one identifies with the various aspects of selfhood?  This is a first approximation of what I called a Copernican Revolution in economic thought.

But how would you measure this?  More on that as I develop my thoughts.   

Kurt Vonnegut Dead, or I Weep for the Loss of a Great Satirist

April 12, 2007

Sad news about Kurt Vonnegut.

 I admit I’ve not read nearly as many of his books as other fans have.  My first experience was in the summer before eleventh grade with the book “Breakfast of Champions, or Goodbye Blue Monday.”  My parents saw the book lying around and thumbed through it, discovering – among other so-called tasteless aspects – Vonnegut’s drawing of an anus and discussion of how filing off ones fingerprints ever so carefully made one more sensitive to fingering a women’s clitoris.  This caused somewhat of an outrage for my parents, who sent a letter to the school board questioning the decision to place such a book on the reading list for high schoolers.  The school board was mostly unresponsive, saying that it did not have the book in the high school library and leaving it at that.  I also explained to my parents that I was rather annoyed at their sudden care for my reading material; I had read much worse without a single complaint from them in the past.  Being reasonable folks (a quality for which I always loved and respected my parents) they eventually relented in their objections (at least verbally). 

I adore satire; I’ve never read one that I didn’t like, and Kurt Vonnegut was a master.  I would later read “Galapagos.”  I found it on a bookshelf at my first job in healthcare, working night shifts at a halfway house for people with brain injuries.  The surreality of the book fit nicely with the often dreamlike occurrences that are par for the course in a place where insanity rules the day.  The devolution of humanity portrayed in the book interwined seamlessly with the occasional screams, raving fantasies, and strange stories of conversations with Satan that were a constant during that Spring of 2001.  For more reasons than these, I left there after just four months of employment.

A sad loss.  Candidates for taking his place: Bret Easton Ellis or Chuck Palahnuk.

Critical Economics

April 10, 2007

The idea of a critical economics is one that – once complete – avoids the accusation of unworkability.  However, practical applicability (i.e. policy prescription) must come at the expense of full description (i.e. as is the case in the simplified economic model).  In this way critical economics is differentiated from many of the other social sciences, such as cultural anthropology (with deepest respect and apologies to a few of my very best friends that happen to be anthropologists – and inspirational ones, at that).  At some point, the description must end if any changes are to be implemented.  Leaps of faith – leaving behind infinite attention to detail –  are, unfortunately, implicit in all activity. 

Critical economics recognizes that the favor its mainstream brethren enjoys with Western governments and corporations arises as much from its willingness to promote the interests of the powerful as from its explanatory power; indeed, the causation runs both ways, and critical economics is both humbled by, and fascinated with untangling, this interplay between politics and economics. 

Critical economics is not rooted in some petty dispute with neoclassical ideas of rationality; though there be something to bounded rationality, it is not yet a cohesive theory – more of an assemblage of unsynthesized factoids about the deviations of mostly western human behavior from a set of assumptions.  To achieve the label “theory”, it must be a suitable replacement for the behavioral assumptions of neoclassical, unbounded rationality.  Bounded rationality, however, is not simply psychological, but related instead to biocognition and context. The field of behavioral economics, insofar as it exists as a combination of mainstream economics and theoretical (i.e. nonphysiologically based) psychology, may very well be following a big red herring altogether. 

Critical economics avoids the Marxist aversion to capitalism, but it also avoids the common economist’s disavowal of socialism/communism.  Neither has ever existed independently; let’s accept that fact and move on.  Whatever the economic system that prevails, it is always buttressed by the attending political situation.  Economic systems are created and supported by the politcal, the social, the contextual.  Only once established does the causation run both ways – does the economic start to affect the political.  It is high time all economists are humbled by the fact that purebred Homo economicus is not only extinct:  he never really existed.  Nothing that we associate with any economic system is innate. 

Critical economics is interested in replacing the self as individual with a more generalized model of the decision-making self.  The individual is an outdated, outmoded conception of the human being.  For economists so loved the individual as an analytical unit, they have developed theories to explain instances of self-sacrifice, marriage, altruism, and more just to account for all the difficulties such a conception creates.  In the process – by, say, incorporating the individual into the family and using the family as the analytical unit (see Becker) – they have come close to an important fact, yet still they seem to miss the point.  Critical economics wants another Copernican revolution – it wants to propose that the individual is orbitting the self, along with many other planets (selflets?) – predicates of self, like the family, the clan, the state, the human race.  Such a reworking of the self lends itself nicely to theories of choice while avoiding the baggage of corrolaries and axioms and apologias that the current economic conception of the self – the individual – requires. 

Critical economics is just that – critical.  It makes mistakes, examines itself and subjects itself to examination, is refined, and is applied again.

Critical economics is subject to empirical analysis and inquiry.  A difficulty of many social sciences is that it is very hard to verify results, and for every proponent of one explanation there are at least two detractors.  This the nature of academic debate, and is healthy, but when it stalls progress, it can doom a field to irrelevance.  Mainstream economics has tended to avoid this problem, but at the expense of universality.  Critical economics faces a doubly difficult task:  It must use existing methodologies while simultaneously working to perfect new ones.  It must use current analytical units (utility, income, wealth), but it must recognize the limitations, and it must work more appropriate means and units of measurement.  Utility, income, and wealth are very poor methods of measuring human behavior outside of the modern, industrial nation-state.  The critical economist uses such units gingerly when outside of that context, and recognizes the implicitly normative, untestable nature of those units.  “There’s telos in them thar hills!”

Corrollary:  Nonetheless, critical economics is willing to grant that human weigh benefits and costs, and that this is a prejudice induced by the undeniability of the explanatory power of 20th century economics.  It is doubtless an approximation, but it is not necessarily an unfounded assumption.  Insofar as humans respond in predictable ways, insofar as pattern recognition and patterned behavior ares observable in all human societies, insofar as humans make decisions: humans appear to weigh benefits and costs.  It is, however, vital to understand the structure of that pattern, the structure of the society and its language and thought, in order to flesh out just what constitutes the quality and magnitude of benefits and costs.  In this critical economics draws from new institutional economics and structuralist thought in general. 

Minimum Wage Forecasting Project

April 5, 2007

The major project in my economics forecasting project is to forecast what effect, if any, an increase in the federal minimum wage would have on the hiring chances of a young worker. I’m going to isolate my cohort to 16 to 19 year olds.

Venturing into a somewhat unkown field, I would like to use panel data for my analysis, and I’m thinking of doing a comparison of Virginia, which uses the federal minmum wage, and North Carolina, which has a minimum wage currently set at 6.15 an hour, which went into effect on January 1, 2007. I haven’t yet settled on the actual cross-section, but I was thinking of dividing into NC_urban and NC_rural and VA_urban and VA_rural. I would like to find some way to have a suburban factor, too, but I’m not sure how to do that yet.

In any event, since it is a forecast I need to decide A) What exactly it is I intend to forecast and B) How I intend to explain changes in whatever it is I do forecast.

The variable to be explained could either be the unemployment rate of individuals aged 16 to 19, or it could be the probability that a person aged 16 to 19, whose current wage is inbetween the current minimum wage and the new minimum wage, will be “disemployed” – the term the literature uses a great deal. The latter is a more direct approach but will probably require a subtler model. So be it. I’ll roll with for now.

Edit:  I realized not long after finishing this post that I could not use probability of disemployment by minimum wage as a dependent variable.  That would require surveying individual workers.  So I think I’ll stick with the unemployment rate for 16 to 19 year olds as my dependent variable.

How to explain this? That comes down to supply and demand for labor and also to the economic short run fluctuations.

Since what I’m attempting to do is explain the variation in unemployment of 16 to 19 year olds as a result of changes in the minimum wage, it is necessary to control for all other factors that will affect the level of employment of someone within that cohort.  So first there’s the question of labor supply:

The quantity of labor supplied = f(wage, cohort size, season [christmas? summer?], educational attainment, in school? [yes/no], family income, race, geographical region[urban, suburban, rural]).

The quantity of labor demanded = f(wage, marginal rate of technical substitution, # of firms, turnover rate)

Of course, if we’re talking about trying to measure the effect that changes in the minimum wage, then we’re talking about a still smaller group of people who are “at risk” – that is, whose current wage is between the current minimum and the future minimum.  Jobs that would hire people for such low wages are typically fast food and retail in general, as well as a few services here and there.  Then there are those youngsters who work on farms and perhaps do even more complicated work but, since they live in rural areas, have lower wages in general due to a lower cost of living.

Introduction – Hopes for the Future

April 2, 2007

Notwithstanding the research blog that was required for my economic analysis class last semester, my experience with blogs begins with my livejournal.  However, this past weekend I had the opportunity to attend the Student Academy and I think my experience confirmed what I’ve been thinking I should do for a while now:  Start committing my more constructive mental and academic events and activities to a publicly accessible blog. 

 That said, there are essentially four broad topics which I will broach in this blog, but if it becomes necessary I will go ahead and run separate blogs in order to maintain some coherence.  These topics are:

1) My ongoing research concerning virtual economies, especially as regards world of warcraft.

This summer I hope to be able to gather the data necessary to test my hypotheses concerning the interactionss between real and virtual economies, especially in MMOs.  I’m not as interested in situations where the interaction is intentionally designed into the game, such as is the case with Project Entropia or Second Life.  My interest is more in the destructive interactions between games like WoW, EQ, EQII, and others with the real life economy.  More on this as it develops, but you can read about the early stages of my research in the blog linked above.

2. Also starting this summer, I hope to begin work on my honor’s thesis in economics with my good friend Becca under the supervision of a few of my professors, primarily Prof. Shawn Humphrey.  Becca is actually an anthropology major, among other things, and we hope to be able to do some interdisciplinary work in combining two fields of social science that often find themselves at odds with one another.  The exact topic is yet to be identified, so again there isn’t much to say about this right now.  More as it develops.

3.  Critique of Economics

As much as I love what I do, and as good as I’d like to think I am at doing it, I am often unsatisfied with certain aspects of traditional economics.  Neither, however, do I necessarily consider myself a member of one particular school of economic thought rather than another.  For lack of a better label, I’ll just call myself a critical economist. 

I think that economists wield a great deal of political power, and we often assume that this is the case because we’re just so damned good at predicting and analyzing human behavior.  While I think that is true, I also think that the assumptions we tend to make about humans in order to analyze them is both advantageous to those who wield political power and, in some cases, unsubstantiated.  You will not find me arguing  here that people are not rational; rather, I am interested in the assumptions we like to make about such socially constructed concepts as the self, conflict, government, economic systems, etc. that act to structure incentives and which are often assumed away or completely unacknowledged.

I’m interested in practicing an economics that analyzes human behavior – not one that forces undue assumptions about behavior onto humans.  This is the critical economics I will be writing about here.

4.  Philosophical meanderings

Along with being an economics major, I take at least one philosophy course every semester, and I’ve been doing this in such a way as to follow the chronological order of western philosophical thought.  I started with Thales and now I’m on Nietzsche.  Next semester is existentialism.  I enjoy the places philosophy takes me, and where I think what I have to say is intersting, I’ll be putting it up here. 

 So this is the big plan; if this blog can live up to just one of these purposes, that’d be great.