Ascription is an Anathema to any Enthusiasm

Recall the counter intuitive result that you can explain the vast majority of all voting behavior with only two metrics, i.e. the vote view model.  The two metrics range liberal to conservative and one is economic, one is social.  There is a mystery, at least to me, about these two metrics.  You don’t really need the social metric to explain most congressional votes.  Yes, the accuracy of the model improves some by adding the social metric; but not tremendously.  So why do we expend so much time ranting about the social dimension?  It’s a disconnect between the talk and the action.

These charts show an average adult (sic) for these two metrics; one point per state.  This data is new to me, I’ve only seen two dimensional vote-view scatter plots for individual legislators.  It would be fun to have error bounds on the points, it would be fun to see the spreads between the voters and the population at large, it would be fun to have dots scaled to electoral votes.

One way to frame up the mystery is to say that we talk about social issues, but legislators act on economic ones to such a degree that we have the same disconnect seen between of signal-value use-value for in sexy but unreliable sports cars.  The sexy bits sell the product, but the actual product delivers something else.  That kind of thing isnt’ unusual, i.e. say/do ~ signal-value/use-value ~ social-values/economic-values.

No doubt there is a framework that explains when the signal-value and use-value of a product tend to diverge.  For example when the feedback loop delivering information about the use value is broken, or when the buy decision is emotional and impulsive.  I bet there is something here that is interesting to be dug out about political activism.

It’s interesting to see charts showing these metrics for the buyer side of the electoral process.

Sitting in the small Vietnamese restaurant in Western Massachusetts an ominous dark cloud slowly delivered one of those marvelous downpours that sometimes end hot summer days. For the woman at the next table the sky was bright one moment; the next the windows were sheeted with water. A young man walked across the square, hood up, jacket unbuttoned, tee shirt glued to his chest.

The woman spoke of global warming to her companions: a friend and a husband. She mentioned that she thought such storms were becoming more common. She mentioned hurricanes. His counter point was that we don’t know much about hurricanes, maybe a few decades. No doubt this was only idle conversation; but I quietly leaned across my table and whispered to my wife. “This is important. Somebody is wrong on the Internet!”

I’ve been haunted by this conversation. He’s wrong. She’s right.

Finally the ghost of the stairwell was sufficiently frustrated to manifest himself, at least in virtual form. Fresh off the presses “Weather and Climate Extremes in a Changing Climate” - From the Brochure: “More frequent and intense heavy downpours and higher proportion of total rainfall in heavy precipitation events.” - “Very Likely.” From volume 3, chapter 2 of the final report: “Paleotempestology is an emerging field of science that attempts to reconstruct past tropical cyclone activity using geological proxy evidence and historical documents.”

Ah, if only. I could have leaned over and said “Paleotempestology!” Well, as we like to say around my house “Oh, tell it to the blog!”

Back in the 1970s my bank called me.  One of my checks had bounced.  They were very nice about it.  Didn’t cost me a cent.  These days deep in the fine print of my bank account’s rules there is a 30$ fee.  But it gets worse.

Over the years main street banking has become more despicable in how they make their money.  The reasonably straight forward model of pooling funds for investments and then paying you a bit of the earnings fell apart when they noticed they could compete on the interest rate and make up the loss on fees.

The banks are now dependent on a business model that runs off fees and charges.  Which means that they sit in conference rooms to architecture their systems to maximize the fees.  The product managers walk a thin line between alienating the customers in the long term, and capturing profits on their stumbles in the short term.

For example let us say you pay 2 thousand dollars in bills, but you only have 13 hundred in the account.  The bank can maximize the bounced check charges if they delay paying your bills so they can batch up as many checks as possible.  That let’s them pay off the larger checks first, so as to increase the chance of draining your account.  With luck they will then have a dozen tiny little checks; these all bounce.  Fees Maximized!

There is a nice term of art for this behavior: Bad Profits.  His list of examples is fun.  Unsurprisingly many of his examples are pricing games.  If your a product manager the question you ask of each of those examples is how bad will it be?  How many customers will I loose.  If the answer is not many, or even not many while I’ve got this job, then the behavior’s not so bad from your point of view.

My bank regularly sends me email about the status of the game we are playing.  They send me solicitations for other products in the mail.  But if I were to bounce a check they wouldn’t notify me.  And unsurprisingly the check can bounce multiple times.

During the depression people hoarded cash with great vigor.  Prices were falling.  Employment was uncertain. it made sense to wait, if you could. And so, the velocity of money plummeted.  Transactions deferred are equivalent to idle economic capacity; i.e. this kind of hoarding is codependent with a depression.  Money is like oil in the economic gears,  Drain it out, the machine ceases to turn over.  When the economic machine seizes up the puzzle is how to keep the oil in the machine.  Add more and the participants will just horde that as well. During the depression there were some fascinating experiments with trying to force the money out of hiding and increase it’s velocity.  For example a village might issue scrip dollars, say by paying their employees with scrip.  This scrip can be converted at any time to real currency at 3% less than it’s face value; or at full value after a year. Now at this point all we have is a local currency.  This next bit is the clever part.  The scrip requires some maintenance.  Once a week, on Tuesday at noon, you have to affix a stamp to the dollar note, and these stamps cost a penny.  This creates an incentive to spend the bill quickly, so as to avoid the chore of affixing the stamp. There are stories of towns reborn after this kind of scrip was introduced; i.e. where entire area’s economy machine had ground to a halt and apparently all that was needed was to find a way to force the oil to stay in the machine.  These notes and stamps are a currency with a negative interest rate.  These schemes appear to be a local version of the macro economic trick of adjusting the interest rate to control the unemployment rate.  I.e. you lower the interest rate to force idle capacity into use, to encourage the machine to turn over. There is a nice little book, a pamphlet really, written in 1933 about these schemes.  You can read it online: “STAMP SCRIP” By Irving Fisher (Professor of Economics, Yale University).  It has some fun stories in it.

Charles Zylstra, the enterprising man who first introduced Stamp Scrip to America (in a small western town) tells this story. A travelling salesman stopped at a hotel and handed the clerk a hundred dollar bill to be put in the safe, saying he would call for it in twenty-four hours. The clerk, whose name was A, owed $100 to B and clandestinely he used this bill for the liquidation of his debt, thinking that before the expiration of 24 hours he could collect $100 from his own debtor, whose name was Z. So this 100 dollar bill went to B, who, greatly surprised, used it to pay his own 100 dollar debt to one C, who (equally surprised) . . . and so on, and so on, all the way down to Z, who, with much pleasure, returned the bill to A, the clerk, who, in the morning, restored it to the salesman. And then did A, the clerk, stand petrified with horror to see the salesman light a cigar with it. ”Counterfeit,” said the salesman, “a fake gift from a crazy friend, Abner; but he didn’t put it over, did he?”

Many failed attempts to add money to the system using scrip are mentioned, but many failed because they didn’t include trick with the stamp.  This story is full of lessons:

In Evanston, Illinois, it was a merchants’ association that inaugurated the Stamp Scrip. They inscribed it with a new word: “Eirma.” This is composed of the initials of the organization name: “Evanston Independent Retail Merchants Association.”  In this long title, the word “Independent” expresses the motive for the scrip; for what the merchants meant to be independent of was the shopping in Chicago instead of Evanston and at the chain stores which had invaded their territory. They thought they could, by an appeal to town loyalty, prevent the scrip from circulating among their rivals. Accordingly, after getting a sufficient number of consents, they printed $5000 worth of “Eirma” and “sold” it to the members according to their respective requirements - for paying their employees and dealing with one another. In other words, the local members put up a guaranty fund of $5000 which was held in escrow by a bank. Fifty stamps, at 2 cents, retired the scrip, which was to he redeemed by the “Eirma” organization. In this instance the banks in general did not cooperate. The bankers’ motive of loyalty to a municipal enterprise was lacking. Neither did the town offer to receive the scrip for tax payments. Nevertheless the town lent its moral support, as the result of a very ingenious bid which was made by the Eirma organization. It so happened that the town’s own finances were in such poor shape that it had been obliged to defray some of its expenses by means of “tax anticipation warrants,” later redeemable by the town in cash. So the Eirma organization agreed to buy these warrants with the cash proceeds of the stamps as fast as these should be sold.(1) Thus, when the redemption date should arrive, for the Eirma the redemption would have to be effected with the initial guarantee fund, not with the proceeds of the stamps. This would leave the tax anticipation warrants still in the Eirma treasury for distribution to the members according to their purchases of stamps. The net result, therefore, of the Eirma dollars amounted to a purchase on the instalment plan of tax-anticipation-warrants, by the members of the Eirma Association.  But in Evanston there crops out the first unfortunate result of copying the Hawarden precedent (of making the stamps affixable, not at set intervals, but with each transaction). Evanston is a larger place than Hawarden, so that it is not so easy in Evanston to detect the small disloyalties of the citizens. Accordingly the chain stores made a flank attack on the local merchants by agreeing with their patrons to receive the scrip, without stamps, provided the patrons would receive them back without stamps. Therefore, at last advices, the stamps were not selling as they should.  The Eirma organization now concedes the superiority of dated scrip, and would like to pass the whole enterprise over to the municipality.

It would be interesting, but I’m not quite able to yet, build the ties between these schemes at things like gift cards, airline miles, and coupons.  Some intend to increase and some to decrease the transaction rates.  Clearly airline miles and gift card issuers are happy if the transactions never happen.  Coupons, like the one I got from Paypal/Ebay for a 10% discount (CPPJUNE0810P good only for 7 days), are intended to increase the rate.  These effects are, I think, disjoint from the localization/loyalty goals of such micro-currency schemes. But really, could you create a internet payment system along these lines?  Now that would be quite a hack! See also vendor selling old scrip notes, and a nod to John.

Kevin Drum asks why conservatives like prizes so much?  Which makes me wonder, is it more popular with conservatives?  To me, they are just a tool.  It’s clear you can organize them in ways that are very productive and constructive [1, 2]

Winners tend to like contests, since having mostly won they think they are fun.  But I don’t see any reason to argue that conservatives are more likely to be winners.  Leaders on both side of the political spectrum are probably winners.

Contests; as a contracting device, pay for outcome rather than labor.  I.e. contests are piece work. The left is more sympathetic to labor.  All the risk is left with the contestants.  A contest sponsor can write the rules in ways that are highly advantageous for him.  Netflix’s search contest did that.  While Google’s android contest did not.  See my previous posting about NASA to offer prizes.  The question is always, do you trust the house.