Author Archives: sanhei

Economic and political cycles interlinked

Suppose the government’s policy determines the state of the economy with a lag that equals one term of the government. Also assume that voters re-elect the incumbent in a good economy, but choose the challenger in a bad economy. This voting pattern is empirically realistic and may be caused by voters not understanding the lag between the policy and the economy. Suppose there are two political parties: the good and the bad. The policy the good party enacts when in power puts the economy in a good state during the next term of government. The bad party’s policy creates a recession in the next term.

If the economy starts out doing well and the good party is initially in power, then the good party remains in power forever, because during each of its terms in government, it makes the economy do well the next term, so voters re-elect it the next term.

If the economy starts out in a recession with the good party in power, then the second government is the bad party. The economy does well during the second government’s term due to the policy of the good party in the first term. Then voters re-elect the bad party, but the economy does badly in the third term due to the bad party’s previous policy. The fourth government is then again the good party, with the economy in a recession. This situation is the same as during the first government, so cycles occur. The length of a cycle is three terms. In the first term, the good party is in power, with the other two terms governed by the bad party. In the first and third term, the economy is in recession, but in the second term, booming.

If the initial government is the bad party, with the economy in recession, then the three-term cycle again occurs, starting from the third term described above. Specifically, voters choose the good party next, but the economy does badly again because of the bad party’s current policy. Then voters change back to the bad party, but the economy booms due to the policy the good party enacted when it was in power. Re-election of the bad is followed by a recession, which is the same state of affairs as initially.

If the government starts out bad and the economy does well, then again the three-term cycle repeats: the next government is bad, with the economy in recession. After that, the good party rules, but the economy still does badly. Then again the bad party comes to power and benefits from the economic growth caused by the good party’s previous policy.

Overall, the bad party is in power two-thirds of the time and the economy in recession also two-thirds of the time. Recessions overlap with the bad party in only one-third of government terms.

Of course, reality is more complicated than the simple model described above – there are random shocks to the economy, policy lags are not exactly equal to one term of the government, the length of time a party stays in power is random, one party’s policy may be better in one situation but worse in another.

Kontoritooli soojusisolatsioon

Mõnel kontoritoolil on paks istepadi, aga seljatoeks õhuke võrk, mis on servadest raamile kinnitatud. See tooliehitus on ebapraktiline, sest tagumik külma ei karda, selg aga küll. Parem disain oleks soojust isoleeriva seljatoe ja hingava võrgust istealusega. Arusaadavad variandid on ka üleni paksu polstriga või terves ulatuses võrgust, vastavalt siis külma ja kuuma sisekliima tarvis.

Kui tagumik toolil külmetab, siis see viga on lihtsasti lahendatav padja või riidetüki (käteräti näiteks) istumise alla panekuga, aga selja tagant kipub polsterdus alla libisema. Piisavalt suure riide võib muidugi üle seljatoe laotada, mis allavajumist vähendab.

Kusemistehnika rappuvas tualetis

Rongi, lennuki või laeva kõikuvas-vappuvas peldikus kustes saab end stabiliseerida peaga vastu enda ees olevat seina toetudes, põlved vastu külgseinu kui need piisavalt lähedal on (nagu enamasti lennukis). Istumine on muidugi veel stabiilsem, aga mõnikord ei kutsu peldiku ebahügieeniline seisukord seda varianti valima. Vappuv peldik on suurema tõenäosusega täis pritsitud, sest eelnevatel püstikusejatel oli sihtimine raskendatud. Lisaks võib salongi rappumine reisijates merehaigust tekitada, misjärel on ka okset peldikus tihemini, sealhulgas väljaspool potti. Seevastu peakõrgusel on minu kogemuse põhjal sein alati puhas olnud. Külgseinad poti kõrval on ka enamasti puhtad. Nii et viie kohaga toetumine (tallad, põlved ja pea) on hea kompromiss stabiilsuse ja hügieeni vahel.

Mikrolaineahju pisut mugavamaks muutmine

Pöörlev alus mikrolaineahjus peaks peatuma samas asendis kui kuumutamise alguses, et tassi kõrv oleks kasutajale mugavas suunas (samas kui sisse asetades), mitte näiteks tassi taga. Väga lühikese tööaja (alla ühe maksimumkiirusel alusepöörde) korral võiks alus lihtsalt seista, pikemate kuumutusaegade puhul pöörelda kiirusega, mis jagab tööaja täispööreteks. Paljudel mikrolaineahjudel saab juba valida, kas alus peaks pöörlema või seisma, nii et alusemootori kiirus on reguleeritav – vaja ainult lüliti programmeerida. Kui mootorikiirust muuta ei saa, siis võiks selle tehases sättida nii, et levinuimate kuumutusaegade (1-minutiliste intervallide) jooksul teeb alus täisarvu pöördeid.

Tradeoff between flashiness and competitive advantage in sports

Sports equipment is often brightly coloured, with eye-catching shape, such as for bicycle frames. Sometimes flashiness is beneficial, for example improving the visibility of a bike or a runner on the road, or a boat on the water. However, in sports where competitors act directly against each other (ballgames, racquet sports, fencing), eye-catching equipment makes it easier for opponents to track one’s movements, which is a disadvantage. For a similar reason, practical military equipment is camouflaged and dull-coloured, unlike dress uniforms.

Athletes would probably gain a small advantage by using either dull grey clothing, perhaps with camouflage spots, or equipment that matches the colour of the sports arena, e.g. green grass-patterned shoes and socks for a football field, blue or red for a tennis court. Eye-deceiving colouring would be especially useful in competitions based on rapid accurate movement and feints, such as fencing or badminton.

Another option for interfering with an opponent’s tracking of one’s movements is to use reflective clothing (mirror surfaces, safety orange or neon yellow) to blind the rival. This would work especially well for outdoor sports in the sunshine or in stadiums lit by floodlights.

One downside of dull clothing may be that it does not inspire fans or sponsors, so wearing it may reduce the athlete’s income from merchandise and advertising. A similar tradeoff occurs in real vs movie fighting. Blindingly bright equipment does not have this disadvantage.

Another downside of camouflage may occur if it replaces red clothing, which has been found to give football teams a small advantage. The reason is psychological: red makes the wearers more aggressive and the opponents less.

Kedrid pahkluunikastuse kaitsega

Kedrid on matkates kasulikud: takistavad lume saapasäärde pääsu, kaitsevad sääri kriimustuste eest. Pika säärega matkasaapad neid eeliseid ei paku (praktiliste matkasaabaste säär ei ulatu kuigi kõrgele), aga kui saapasääred piisavalt jäigad on, siis kaitsevad pahkluud nikastuste eest, sarnaselt slaalomisuusasaabastele. Pika sääre negatiivsed küljed on saapa jalgatõmbamise ja paelte sidumise aeg, jala ja pahkluu higistamine.

Kedride ja pika säärega saabaste eelised saaks kombineerida, asendades saapasääre kombineeritud kedri ja nikastuskaitsega. Nikastuskaitse takistaks pahkluu liigset paindumist, aga laseks väikese amplituudiga liikumisel toimuda. Üks võimalik mehhanism oleks saapa külge kinnitatud jäigad pulgad, mis hoiavad üleval põlve lähedal ümber sääre käivat võru, millel on igas küljes liikumisruumi. Kui pahkluu liiga palju ei paindu, siis võru säärt ei puutu. Suure pahkluukalde korral hoiab võru saapa pulkade abil paigal ja takistab niiviisi pahkluu kaugemale liikumist antud suunas.

Kedri saaks ehitada pulkade peale, lihtsalt ühendades need omavahel tugeva riidega, mille saab ülalt (võru kohalt) kummipaelaga jala ümber koomale tõmmata, et lume sissevajumist takistada.

Nikastuskaitse ei tohiks jalalaba neutraalse asendi korral jäigalt vastu jalga olla vähemalt kahel põhjusel: pahkluu liikumatus takistaks normaalset kõndimist ja liigne abi pahkluud stabiliseerivatele lihastele viiks nende atrofeerumisele. Seevastu kui nikastuskaitse pahkluupainde alguses vastu säärt ei puutu, siis pahkluulihased pingutuvad ebatasasel pinnal kõndides automaatselt, et jalalaba kaldumisele vastu töötada.

Golf as a cartel monitoring device for skilled services

Many explanations have been advanced for golf and similar costly, seemingly boring, low-effort group activities. One reason could be signalling one’s wealth and leisure by an expensive and time-consuming sport, another may be networking during a low-effort group activity that does not interfere with talking.

An additional explanation is monitoring others’ time use. A cartel agrees to restrict the quantity that its members provide, in order to raise price. In skilled services (doctors, lawyers, engineers, notaries, consultants) the quantity sold is work hours. Each member of a cartel has an incentive to secretly increase supply to obtain more profit. Monitoring is thus needed to sustain the cartel. One way to check that competitors are not selling more work hours is to observe their time use by being together. To reduce boredom, the time spent in mutual monitoring should be filled somehow, and the activity cannot be too strenuous, otherwise it could not be sustained for long enough to meaningfully decrease hours worked. Playing golf fulfills these requirements.

A prediction from this explanation for golf is that participation in time-consuming group activities would be greater in industries selling time-intensive products and services. By contrast, if supply is relatively insensitive to hours worked, for example in capital-intensive industries or standard software, then monitoring competitors’ time use is ineffective in restricting their output and sustaining a cartel. Other ways of checking quantity must then be found, such as price-matching guarantees, which incentivise customers to report a reduced price of a competitor.

Rain-based waterfall in a building

Many large buildings have a high lobby – some of these reach the roof, which in that case is often transparent. Some edifices also have an indoor water curtain in the lobby, or water running down a decorative wall. A way to save the cost of pumping the water up for such a waterfall is to rely on rain. The roofs of high buildings are flat anyway, in order to direct water into internal drainpipes, as opposed to sending the water over the eaves of a slanting roof. If the pipe from the roof is made wide, transparent and put it in the middle of the lobby, then whenever it rains, a waterfall occurs in the pipe. This works best in rainy climates and will be especially spectacular in intense rain and with a single pipe receiving the water from the whole inward-slanted roof. The lobby may become noisy though with the sound of all that rushing water.

Disagreement over policy due to preferences vs beliefs

Disagreement about the best policy is due to different preferences or beliefs, or both. Believing that different preferences cause the opinion differences discourages debate (no point arguing over taste after all), leads to polarisation and partisanship. For example, right-wingers may believe that left-wingers prefer to disincentivise entrepreneurs with high taxes, and left-wingers may believe that right-wingers prefer to harm the poor by reducing government transfers. To put it starkly: the other side just prefers evil policy by nature.

By contrast, believing that disagreement over what should be done is caused by differing beliefs assumes that the other side is good-hearted, but mistaken. For example, left-wingers may believe that right-wingers mistakenly believe that transfers to the poor disincentivise them from working or finance their addictions. Right-wingers may believe that left-wingers mistakenly believe that entrepreneurs are not discouraged by higher taxes – being entrepreneurial by nature, they start companies because it is interesting, not out of greed. Mistaken opponents’ opinions can be corrected using data and logic, patience and understanding.

Even if policy disagreement is interpreted as coming from divergent preferences, some such differences are interpreted as less evil than others. For example, impatience is perceived as better than selfishness. Many policies trade off non-simultaneous benefits and costs: invest in infrastructure now to use it after some years, mitigate climate change now to reduce harm to future generations. Paying a current cost for a future benefit may be optimal for patient people, but not for impatient, causing a policy disagreement. The same opinion difference may be due to altruistic people wanting to invest to help others (future users of the infrastructure or the environment), but selfish ones preferring to keep the money now. Believing the same disagreement to be due to selfishness polarises people more than perceiving unequal patience as the cause.

Platform providers fake being popular

Crowdfunding platforms, stock exchanges and other providers of two-sided markets want to appear popular, because having more buyers attracts more sellers and vice versa. The platform’s revenue is usually proportional to the number of users, because it charges a commission fee on trades or advertisers pay it to show ads to users. The exchange’s marginal cost of a user is close to zero, giving it an incentive to fake a high volume of trades, a large limit order book and a small bid-ask spread.

The platform’s cost of posting a great volume of outstanding buy and sell orders at a small spread is that many investors try to trade at these favourable bid and ask prices. Either the market maker has to take the other side of these attempted transactions or is found fraudulent. Taking the other side results in a large loss if some investors are better informed than the exchange.

The platform could falsely display a large trading volume, but keep the order book honestly small by adding fake trades at prices between the bid and the ask only, so no investor’s real limit order is ignored. This seems difficult to detect, unless one side of the limit order book is empty (e.g. no buyers) and at least one at-market order on the other side (e.g. a sell) is outstanding. In this case, any trades occurring would have to satisfy the at-market order. However, the platform or real investors can then take the other side of the at-market order at a very favourable price to themselves, which discourages at-market orders. A large trading volume with a thin order book is still slightly suspicious, because it requires that crossing buy and sell orders between the bid and ask prices arrive almost simultaneously, in order to be matched without appearing on the order book for long, and without triggering the real limit orders. Displaying the fake buys and sells on the order book risks attracting actual matching trades, which the platform would have to honour (at a cost).

Without automated quote matching, there are no at-market orders, for example on the Funderbeam crowdfunding platform. Instead, everyone either posts a limit order or picks an order from the other side to trade with, e.g. a buyer chooses a sell. Investors can pick an order with a worse price (higher sell or lower buy) on the other side, which frequently occurs on Funderbeam. Choosing a worse price is irrational, unless the traders in question are colluding, so the asset is effectively not changing ownership. Reasons to carry out such seemingly irrational trades are to manipulate price and volume, e.g. price can be raised or reduced by targeted trades outside the bid-ask interval. Volume can only increase after added trades, rational or not, but such seemingly greater activity is exactly what benefits the stakeholders of the platform. The employees of the market maker have a natural motive to fake-trade between themselves to make their firm look good, even without any inappropriate pressure from their boss.

Another way to attract issuers and investors is to demonstrate successful initial public offerings, meaning that the funds are raised quickly (good for issuers) and the price of the newly listed stock (or other asset) goes up, which benefits investors. Adding fake capital-raisers is difficult, because potential investors will check the background of the supposed issuer. Inserting spoof investors into an actual funding campaign is costly, because real money would have to be invested. One way to manipulate popularity upward is to simultaneously add a fake issuer and fake investors who satisfy its funding need. The idea is to not leave time for real investors to participate in the campaign, by pretending that the capital-raiser achieved its target funding level before most investors could react. This is easier in markets with a small number of real investors and without an auto-invest feature. However, the real investors who were supposedly pre-empted may still research the supposedly very popular issuer.

A costless way to briefly boost the popularity of a real fundraising campaign is to add fake investors after the target funding is achieved, and forbid issuers from increasing the target or accepting funds from those who subscribed after the goal was reached. Any campaign meeting its target can then be made to look heavily oversubscribed. However, if the issuers are informed in advance of the restriction not to increase the target, then they may find an alternative unrestricted platform to raise funds. On the other hand, if the restriction is not mentioned beforehand, then it will likely anger the issuers who will then create negative publicity for the platform. Competition between exchanges thus curtails their manipulation incentives.

The platform can motivate real investors to raise their bids when the campaign reaches its target by rationing demand: bidders in an oversubscribed share issue get only a fraction of what they wanted to buy. Anticipating this, buyers will increase their requested quantities so that the fraction of their new bid equals their actual demand. This makes the campaign look oversubscribed and creates a feedback loop: if other investors increase their quantities, then rationing reduces the fraction of a given investor’s demand that will be satisfied, so this investor raises her or his requested amount, which in turn makes others increase theirs.

If investors know of the bid rationing in advance, then they may select a rival market provider without this restriction, but if rationing takes them by surprise, then they may leave and publicly criticise the platform. Capital-raisers compare exchanges, so if many market providers inflate demand and the issuers pay attention to the level of oversubscription (instead of the fraction of campaigns reaching the target, which is what should matter to the capital-raiser), then the biggest inflator wins. Of course, platforms may not want to reveal unsuccessful campaigns (e.g. Funderbeam does not), so public data on the fraction of issuers who achieved their funding goal is unlikely to exist.

Theoretically, the feedback from bid rationing to increased quantity demanded could lead to infinite amounts requested. A countervailing incentive is that with positive probability, other investors do not honour their commitment to buy, in which case a given investor may be required to buy the amount (s)he demanded, instead of the lower amount (s)he actually wanted. If there is no commitment to buy (for example, on Funderbeam the bids are only non-binding indications of interest), then the danger of overcommitting is absent, so the rational choice seems to be requesting an infinite amount. Investors do not indicate infinite interest, so either they are irrational or some other penalty exists for outbidding one’s capability to pay.