auction

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Are misspelled ads an opportunity to make money on eBay?  Is there a strategy for “Rock, Paper, Scissors”?  Why do lobbyists spend so little money to influence our politics?  Why are online betting sites better at predicting election results than pollsters like Gallup?

All these and other questions were raised by the article on auctions.  The EB‘s article is fairly brief, defining English auctions (with ascending prices) and Dutch auctions (used for tulips, with descending prices), but giving little history.  Wikipedia points out that in 193 A.D. the Praetorian Guard put the entire Roman Empire up for auction in 193 A.D.  (Giving new meaning to the phrase “Winner’s Curse,” the auction winner was later beheaded after a civil war.)

I started wondering about the mathematics and strategies behind auctions.  Is one form of auction (e.g., silent, English, Dutch) always better than another, or do some auction forms suit some products better than others?  What strategies and tactics tend to produce auction wins?  Are there behaviors that harm everyone in an auction?  It turns out that economists have done a lot of work in the game theory of auctions.  Here are some fun facts about auctions, with a bit of game theory thrown in occasionally.

1)  In a form of “auction arbitrage,” some people seek out misspelled ads on eBay (e.g., labtop, saphire, or dimond), knowing that there will be fewer bidders and thus lower prices.  They buy at a low price and immediately resell at the “correct” price (http://bit.ly/1HiGIwY).

2)  Takashi Hashiyama, president of a Japanese electronics firm, couldn’t decide which auction house to use to unload the company’s art collection.  He decided to use “Rock, Paper, Scissors.”  Sotheby’s left it to chance, and Christie’s used scissors to beat their rival’s paper (http://cbsn.ws/1HiF52j).  Mathematicians have suggested that if there is only one round of the game, chance is the best strategy, but if there is more than one round certain reactions to your opponent’s play will give an edge (http://bit.ly/1HiG2HS).

3)  Why do the 35,000 registered lobbyists in D.C. spend only $2 billion every year trying to influence Congress?  If government spending is $10 trillion for every 4-year election cycle, either lobbyists are getting a fabulous bargain when they “buy” our government, or our government is only .1% corrupt.  You decide (http://slate.me/1HiDMAl).

4)  In the last four presidential contests, the Iowa Electronic Market’s market price odds on the eve of election were off by an average of just 1.37 percent — better than Gallup, which had error margins of between 1.5 and 2 percent.  It is thought that such auctions tap into a consensus of the more well-informed (http://bit.ly/1HiHGtb).

5)  If you spend much time on eBay, you’re very familiar with sniping, which is attempting to win an auction with a bid at the last possible moment.  This is a very old tactic.  In some parts of England during the seventeenth and eighteenth centuries auction by candle began to be used for the sale of goods.  The end of the auction was signaled by the expiration of a candle flame, which was intended to ensure that no one could know exactly when the auction would end and make a last-second bid.  One highly successful bidder had observed that, just before expiring, a candle-wick always flares up slightly.  On seeing this, he would shout his final — and winning — bid.  Sometimes, other unpredictable processes, such as a footrace, were used in place of the expiration of a candle. (http://en.wikipedia.org/wiki/Auction)

So, the next time you are watching the television show Storage Wars, and you see Dave Hester trying to bid up a unit and dump it on someone else, ask yourself “What does game theory have to say about this?”

Illustration source: http://bit.ly/1AYmJfN.

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Auburn System

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This is a “penal method of the 19th century in which persons worked during the day and were kept in solitary confinement at night, with enforced silence at all times (EB).”  In fact, the word “penitentiary” comes from the idea that prisoners, through silent reflection on their crimes, might become penitent.  Thus imprisonment under the Auburn System could be seen as penance.

Some of the purposes of this system were “to destroy the identity of the inmate (and thus make him easier to control) and to crush the ‘criminal subculture’ that flourished in densely populated prisons (Wikipedia, “Separate System”)” and to discourage prisoners from learning criminal habits and having them reinforced by the existing prison population (EB, “Auburn System”).  (“Destroying the identity” reminded me of military boot camps, which also seek to destroy individuality through conforming appearances and behavior.)

“In certain prisons such as Pentonville, in London, even during communal exercise, prisoners were required to wear masks in silent isolation.  Prisoners incarcerated in separate system prisons were reduced to numbers, their names, faces and past histories eliminated. The guards and warders charged with overseeing these prisoners knew neither their names nor their crimes, and were prohibited from speaking to them. Prisoners were hooded upon exiting a cell, and even wore felted shoes to muffle their footsteps (Wikipedia, “Separate System”).”

In addition to being known for silent isolation, the Auburn, New York correctional facility achieved several other firsts (Wikipedia, “Auburn System”):

1)  the first prison to gain money as a profit for the labor of the prisoners.

2)  the first to institute the “lockstep”: The prisoners marched in unison and had to lock their arms to the convict in front of them. The prisoners had to look to one side and were not allowed to look at the guards or the other inmates.

3)  the first to give prisoners a distinctive garb familiar to us today, a grayish material with horizontal stripes.

In addition, the prison permitted tours by sight-seers.

A method of punishment sounds familiar to those of us who have read about waterboarding and the ALS Challenge.  “The shower bath consisted of a barrel about 4½ feet high with a discharge tube at the bottom. The prisoner was stripped naked, bound hand and foot, with a wooden collar around his neck to prevent him moving his head. The barrel, with the inmate inside, was placed directly under an outlet pipe, where water, sometimes iced, would pour down (Wikipedia, “Auburn System”).”

The article raised several interesting questions for me:

1)  Solitude and silence can be used for spiritual purposes by monks and nuns.  When it is forced upon people, however, is there any spiritual benefit?  (On a related parenting note, is there any point in forcing children to apologize for wrongs they have committed?)  Does penal isolation in fact create mental illness, as some claimed the Auburn System did?

2)  Do human beings have an inherent psychological need to do some acts of penance to assuage their guilty consciences?  (The Catholic church may be tapping into something fundamentally human here.)  Should we give prisoners opportunities for penitential acts and even formal ceremonies to mark their significance?

3)  How is it that dehumanization is used in prison camps, boot camps, and concentration camps for such different purposes: to break group identities, to form group identities, and to make the murder of an outgroup easier?

4)  Given the use of the shower bath in prisons and the ALS Ice Bucket challenge, was waterboarding prisoners in Guantanimo really that immoral?  It certainly is not unprecedented.

5)  I’ve always found it interesting that God’s system of justice in the Old Testament made no mention of imprisonment.  Criminals either made restitution for the less serious crimes or were executed for the more serious crimes.  Would our society be better off replacing imprisonment with restitution and the death penalty?  Besides lowering costs and giving prisoners a chance to do penance, this might also provide a useful test for whether a law is needed.  If a restitution is hard to define, either because what should be given back is hard to define or the person to whom it should be given is hard to identify, then perhaps any law with such difficulties is inherently unjust.

Photo source: http://bit.ly/1BEcbBx

Auburn

Three different towns (in Alabama, Maine, and Washington)–all named for a town mentioned in Oliver Goldsmith’s poem The Deserted Village (1770).   The relevant quote from the poem is “Sweet Auburn, loveliest village of the plain.”

The poem itself is a critical social commentary.  “Aristocrats sought to extend their large estates by purchasing land previously run by small private farmers. Unwilling to work for the landowners, the residents leave the village for miserable urban life in England or America (EB).”  The poem is a commentary on rural depopulation, urban estrangement, and excessive wealth.

“[R]eaders and critics ignored the political content of the poem, focussing instead on Goldsmith’s idyllic descriptions of Auburn.  This second type of reading was the most common (Wikipedia).”

I thought it was interesting that so many towns were named in honor of this particular poem.  Why was this particular poem so popular in America?  And how literate exactly were the early Americans?  I also thought it was interesting that the founders of these towns seemed to miss (or ignore) the essential meaning of the poem, which goes far beyond the simple description of an idyllic town in the first few stanzas.

Atlanta Compromise

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Are black Americans truly integrated into American culture?  If, instead, they are a separate nation within a nation, is America in trouble?

In the debate over illegal immigration,  It is a common complaint that many Mexican immigrants never truly become Americans in the “melting pot” sense.  They never adopt our language and customs and become within a few generations indistinguishable from the rest of America.

History tells me that any nation without a common culture is destined to break apart, so I share these concerns.

But what if there is a problem with the melting pot that is even more longstanding and serious than Mexican immigration, and that is black America?

It is clear that there is a cultural divide between black America and white America.  The differences are most obvious in language and music, but it is easy to think of other examples, such as names blacks give to their children (DeShawn, DeAndre, Demetrius, Jamal, Shanice, Jasmin, Aliyah, and Roshanda)(http://abcn.ws/1CKbMnE) and the separate black dorms one often sees on college campuses.

Booker T. Washington was in favor of social separation.  In his Atlanta Compromise Speech of 1895, he said that “[i]n all things that are purely social we [whites and blacks] can be as separate as the fingers, yet one as the hand in all things essential to mutual progress (http://historymatters.gmu.edu/d/39/).”

“Washington asserted that vocational education, which gave blacks an opportunity for economic security, was more valuable to them than social advantages, higher education, or political office….In return for African Americans remaining peaceful and socially separate from whites, the white community needed to accept responsibility for improving the social and economic conditions of all Americans regardless of skin colour (EB).”

However, even with segregation laws abolished in the 1960’s, it seems that blacks have self-segregated, freely choosing to be “separate but equal.”  Is this separation, often in the name of racial pride, really worth it if studies show, for example, that distinctively black names on resumes get fewer callbacks (http://abcn.ws/1CKbMnE)?  (See also this interesting Freakonomics article on distinctively black names http://slate.me/1EokHeX.)

Another thing that struck me was Washington’s warning that blacks “shall constitute one-third and more of the ignorance and crime of the South, or one-third [of] its intelligence and progress,” depending on whether whites chose to hire blacks.  I was really struck by the sad fact that, despite educational and vocational opportunities for blacks that are far greater than those available in 1895, blacks constitute a very large percentage of people incarcerated.  (The reasons for this go far beyond the scope of this article.  Black economists Walter Williams and Thomas Sowell have discussed this with far better skill and evidence than I could muster, and I highly recommend their writings.  Spoiler alert: It’s not racism, but failed social and economic policies that have done the most damage to black America.)

Washington also warned that blacks should not “permit our grievances to overshadow our opportunities.”  Unfortunately, I think this is exactly what has happened today.  We have an entire industry based on grievances.   It is run by race hustlers who profit by extorting money from corporations and communities in exchange for promises not to incite boycotts or even riots.

The final thing that struck me was Washington’s comment that “[n]o race that has anything to contribute to the markets of the world is long in any degree ostracized.”  This sounds very similar to the main argument for Western trade with China, wherein it was claimed that capitalism would lead to political freedom for the Chinese people.  Cuba, however, has traded with everyone in the world other than the U.S. and yet remains a Communist slave state.  This makes me wonder if free markets really are the catalyst for political freedom that people claim.  It seems to run the other way, with political freedom a necessary pre-condition for economic freedom.

Photo source: http://bit.ly/1NsBq3D