On Sugon, McNamara and Intengan (2012): A Case for the RH Bill

On 26 March 2012, Sugon, McNamara and Intengan of the Ateneo de Manila University web-published a paper on Estimating abortion rates from contraceptive failure rates via risk compensation: a mathematical model, which puts forward a theoretical model linking the abortion rate and contraception (more on this later). More technically inclined readers can download the pdf here. It would probably have gone unnoticed, but Mr. Antonio Montalvan III of the Inquirer featured it in his column and sung it high praises. Bottom line, it presents a mathematical argument for not passing the controversial RH bill, at least at this time, because there is a chance that contraceptives can actually increase the abortion rate.

The paper presents a model for the number of abortions as a function of six determinants: how frequently a woman has intercourse, when she begins sexual activity, cumulative time she is pregnant (infertile time on top of the monthly infertile period), cumulative time she is breastfeeding (they assume a woman is infertile while she is breastfeeding), the contraceptive failure rate, and the risk compensation factor. Notwithstanding the other problems with the paper, this post will just take a look at their model and the conclusions they gather from that.

The Model in Brief (no pun intended)

In a nutshell, their contraception-to-abortion argument hinges on the risk compensation mechanism they set forth in their paper. They argue, using maths, that women (curiously, they make no reference to men in their paper) will be more sexually active if contraception is available (economists will easily recognise this as the moral hazard problem). Sugon, McNamara and Intengan begin by building a model of a woman's likely number of abortions (they couch the discussion in individual language, although I would presume they are referring to population averages) in equation (10):

Na = (1/s)[10(ns - np - nb)(1 - ce)]

where Na = number of abortions with contraception (this is actually the number of pregnancies, which the authors say may be aborted; later on this is just the number of abortions); s = interval between sexual intercourse in weeks (the lower this number, the more frequently she is having sex); ns = number of "womb years" (a proxy for fertile period depending on time being sexually active, so the earlier a woman starts having sex the higher this number); np = number of womb years a woman is pregnant; nb  = number of womb years a woman is breastfeeding (she is assumed to be infertile during this time, even though LAM doesn't apply to all breastfeeding mothers); and ce = the success probability of contraception, with 0 < ce < 1, so (1 - ce) is the contraceptive failure rate.

The authors then lay out their model of risk compensation in section 5 of their paper (page 7). The crucial link between contraceptive use and frequency of sexual intercourse can be seen in equation (12) under hypothesis 3:

s = k(1 - ce)^m

where k is a constant and the other variables are as earlier defined. In describing Hypothesis 3 and equation (12), the authors say that "we propose that a woman's intercourse interval s is proportional to the mth power of the contraceptive failure rate 1 - ce" (page 7). The boundary of equation (12) for s is then analysed when ce approaches zero, or (1 - ce) approaches one. This is done to examine the frequency of sexual intercourse when contraceptives fail miserably such that it is as if one is not using contraceptives at all. They find in equation (14) that

lim (ce -> 0) s = k = s0

where s0 = interval between sexual intercourse in the absence of contraception, or when ce = 0.  Thus, equation (12) becomes equation (15):

s =  s0(1 - ce)^m

Plugging in equation (15) into (10) and doing some algebra, they derive an equation linking the number of abortions with contraceptive use in equation (18):

Na = Na0 / (1 - ce)^(m - 1)

where Na = number of abortions with contraception; Na0 = number of abortions without contraception; and ce and m are as before. One can see that

Na'(ce) = Na0(m - 1) / (1 - ce)^m

so that the sign of  Na'(ce) depends on the sign of (m - 1): any value of m > 1 and we get Na'(ce) > 0, so contraceptive use will increase abortions. In other words, the way contraceptives affect the abortion rate depends on the magnitude of m.

The s(ce) Function and the RH Bill

The value of m is crucial for the paper because this is used to argue that the country should hold off on passing the RH bill.  Since contraceptives could reduce, increase, or have no impact on abortions depending on the value of m, they argue that the government should hold off on the RH bill pending an estimation of m. After all, if m happens to be empirically greater than unity then the RH bill will increase abortions, rather than decrease them as the bill's supporters argue. Other than the obvious line of critique against this argument (risk compensation also applies to seat belts and health insurance), the problem is that there is no explanation for the functional relationship between sexual frequency and contraceptive effectiveness.

Their argument against the RH bill hinges on their arbitrary definition of the risk compensation mechanism as seen in equation (12), which introduces m and leads to equation (18). It is arbitrary because it is neither derived from other equations, the outcome of an optimisation exercise, nor taken from previous literature. While the other parts of the model were derived from other equations, they just assumed a functional form for s(ce) and went from there. There is also no reason, theoretical or empirical, to say that the risk compensation mechanism should follow the power law.

That said, their incorporation of the risk compensation mechanism is a valid exercise: it is reasonable to say that intervals between sexual intercourse could be inversely proportional to the effectiveness of contraception, especially those who do not wish to have children at the moment. Looking at equation (12), one can see that the risk compensation mechanism, through the s(ce) function, needs to satisfy two conditions:

Condition 1: s'(ce) < 0

Condition 2: lim (ce -> 0) s(ce) = k = s0

Taken together, the two conditions state that (1) contraceptive effectiveness is inversely related to the intercourse interval and (2) if contraceptives are totally ineffective s(ce) should revert to the no-contraception case of s0. This would be a more general formulation of their Hypothesis 3.

Using their exact same model, but being just as arbitrary as the authors in defining s(ce), one can define the risk compensation mechanism as

s*(ce) = k / (1 + ce)

which one can easily verify satisfies the two conditions above. This then becomes

s*(ce) =  s0 / (1 + ce)

after the limits operation. The equation implies that, on average, women (men are not part of the authors' model) will be twice as sexually active with 100% effective contraception as they are without them. Plugging this into equation (10) gives us the following function for the number of abortions:

Na* = (1/s0)[10(ns - np - nb)(1 - ce^2)] = Na0(1 - ce^2)

So how does increasing contraceptive effectiveness affect the number of abortions relative to the no-contraceptives situation? One can easily see that

Na*'(ce) = - 2Na0ce < 0

so promoting contraceptive use will unambiguously reduce the number of abortions. In other words, using their same model while slightly changing the risk compensation function, but keeping the same properties, one can arrive at a totally opposite conclusion: approve the RH bill now because it will reduce abortions. In fact, if contraceptives were 100% effective there would be zero abortions!

So What's the Point?

The Sugon, McNamara and Intengan paper essentially sets out a thought experiment with the aim of bolstering the argument that contraceptives can increase, rather than decrease, the number of abortions. However, what we show here is that the driver of their thesis-- their formulation of the risk compensation mechanism-- is an arbitrary assertion meant to arrive at their desired conclusion. There was no attempt to buttress this formulation through a risk minimisation (or sexual utility maximisation) operation, or to generalise the functional form of the mechanism. What we show here is that, using essentially their same model and being as arbitrary as the authors, one can do a similar thought experiment and arrive at a totally different conclusion and policy prescription. Upon closer examination, the authors' conclusions are really just assertions dressed in the language of mathematics. Take out those assertions and the paper falls apart.

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[Postscript: As a critique, it would have been easy to just point out their unfounded assumptions, especially in equation (12), and do away with the paper, but it would be unfair to the authors. I really admire their effort to further their side through the use of hard logic-- this is really much better than the fear mongering and name-calling we have been hearing from other anti-RH campaigners. A bit more of this, and a lot less of Sotto's unoriginal dramatics, would be much appreciated.]

So when does it make sense to play Lotto 6/49?

Ok, by "make sense" here I mean you don't lose money in expected value terms; i.e., you're not throwing money in the crapper by spending P20 on that Lotto 6/49 ticket (unless, of course, you think PCSO does great social work and that P20 is your corporal work of mercy for the day).

First let me explain what I mean by "expected value". In games of chance such as lotto, expected value is the amount of winnings (or loss) multiplied by the probability of winning. Suppose the game of chance is tossing a fair coin and you get P100 if heads come up and you get zilch if tails come up, so you have a 50/50 chance of winning and getting zilch. In this case, the expected value from the coin-toss game is

EV = (P100)(0.5) + (P0)(0.5) = P50

So basically the expected value is the amount you can expect to gain from playing a game before you actually play it (e.g., when you're thinking of buying the ticket). Of course, it "makes sense" to play if the cost of the ticket is less than or at least equal to how much you can expect to win. In this case you probably won't (or shouldn't) play the game if you have to gamble more than P50 to have a 50% of winning P100, but it'll make sense to play if your bet is only, say, P25.

Now let's look at Lotto 6/49. The game involves a player picking 6 numbers from 1 to 49 (hence the name). A lotto ticket, on the other hand, costs P20, which the player has to pay if he wants to have a chance of winning. PCSO, which manages the game, then (presumably) randomly selects 6 numbers and publishes it. If the player gets 6 out of 6 numbers he gets the pot, which could run to the tens to hundreds of millions of pesos. Getting 5 out of 6 numbers gets you P20,000; 4 out of 6 gets you P500; and 3 out of 6 numbers results in balik taya, or you get your P20 back.

So, and this is where it gets dicey, what are your chances of winning? If you buy one ticket, then you will win the pot if your exact 6 numbers are selected out of all the possible combinations of 6 numbers out of 49, which are 13,983,816 possible combinations (mathematically, this is 49C6). Therefore, the probability of your 6 numbers winning the pot is 1/13,983,816 = 0.00000007151.

But then winning the pot isn't the only way you can win-- you will also win something if you get 5/6, 4/6, or 3/6 numbers correct. Choosing 6 numbers is like getting 6 chances of getting 5 numbers correct since there are 6 possible combinations of 5 numbers from the 6 numbers you chose. Eh? Suppose you very creatively chose the following 6 numbers:

[1, 2, 3, 4, 5, 6]

Then the possible combinations of 5 numbers from the 6 numbers you chose are:

[1, 2, 3, 4, 5], [1, 2, 3, 4, 6], [1, 2, 3, 5, 6], [1, 2, 4, 5, 6] [ 1, 3, 4, 5, 6], and [2, 3, 4, 5, 6]

Similarly, you get 15 chances of getting 4 numbers correct and 20 chances of getting 3 numbers correct from the set of 6 numbers you chose. Using combinatorial mathematics, the expected value from the lotto game can be computed as:

EV = (1/49C6)(X) + (1/49C5)(6C5)^2(P20,000) + (1/49C4)(6C4)^2(P500) + (1/49C3)(6C3)^2(P20)

where X = the winning pot, which can change. The squared terms are there to take into account that both the player and PCSO choose 6 numbers.

Since the cost of a lotto ticket is P20, how much should the pot be so that the expected value from playing equals the cost of a ticket? Setting EV = P20, we can calculate X as... P261 million.

Yes, the pot will have to be at least P261 million before it actually makes sense to play Lotto 6/49. Any pot lower than that and you're basically throwing P20 into the crapper, just like paying P75 to play the coin-toss game above.

But then if buying that P20 ticket gives you the right to hope and to dream about what you will do in the off-chance you will win the pot, then by all means buy the ticket. After all, that's what PCSO (and all casinos, for that matter) are hoping you will think.

Paul A. Samuelson, 94

Paul A. Samuelson, Economist, passed away on 13 December 2009 in his home in Belmont, MA. He was 94. He is probably best known for his Economics textbook, which, even after n editions, must be among the most widely used textbooks in history. First written in 1948, I used the textbook when I took Economics 11 in 1997 and it is probably still being used at the School today.

In the name of everyone who had to study introductory economics whether as a required subject or as the first step in a life-long exploration of this science, thank you.

And the winner is...

... Paul Krugman, "for his analysis of trade patterns and location of economic activity".

See the scientific background here.  And I quote:

"It was Paul Krugman who most clearly and forcefully articulated the revolutionary nature of this new approach for the theory of international trade. His short paper in the Journal of International Economics, entitled 'Increasing Returns, Monopolistic Competition and International Trade' (1979a), is twofold. It contains not only a new trade theory that allows us to explain observed patterns of intra-industry trade, but also the seeds of a new economic geography where the location of production factors and economic activity can be stringently analyzed within the framework of a general-equilibrium model. Remarkably, the paper achieves all of this in only ten pages, and in a very simple and transparent fashion." [emphasis mine]

Wow, a Nobel Prize-winning paper in only ten pages.  Dang.

Reality TV: Financial Catastrofuck

The US Congress and Dow Jones don't usually make exciting TV, but last night was different.  Watching BBC and CNN at 1:30 to 4:00 in the morning was more nail-biting and nerve-wracking than that overhyped, inconsequential Ateneo-La Salle game.  By the time it was over, the Dow Jones lost 778 points, its biggest one-day loss ever.  The World Trade Center being demolished by two planes in the middle of Manhattan did not have that much impact on the Dow.

The day started ominously enough with multiple bank failures and bailouts-- in the US, UK, Belgium, Germany, even Iceland-- and that was on top of all the bank failures and bailouts of the past two weeks. Then congressmen started debating whether or not they will approve the $700 billion Emergency Economic Stabilisation Act, which is essentially a transfusion of captial into markets that have stopped running.  It was a very unpopular bill as Main Street complained that their tax dollars are being used to help Wall Street fatcats while ordinary taxpayers are left with foreclosures and bankruptcies.  But after three days of intense negotiations and with the solid backing of the White House and the leaders of the Democratic and Republican parties, the bill's passage was almost a foregone conclusion.

Then the voting started.  The Yeas started with a margin of 30 votes, all the way to 110 Yeas and 80 Nays.  Then the margin was whittled down to 25.  20.  15.  10.  Then it was dead even with only a few minutes left for voting.  Then the Nays were leading and the lead stood.  Voting ended with 228 Nays and 205 Yeas.  The bill failed.

As voting took place CNN was showing a live feed from Dow Jones showing real-time reaction to the vote.  When voting started the Dow was down around 200 points.  Then it was down 300.  400.  500. 600.  Hala Gorani, the CNN anchor who used to be a finance news reporter, could not believe the numbers she was seeing.  By the time the 15-minute voting window ran out the Dow lost 700 points.  The index was erratic for the next few hours while the House Democrats and Republicans were blaming each other, but by the end of the trading day the Dow suffered its worst single-day loss ever, worse than 9/11, the DotCom Bust, and the Asian Crisis.  And after a few hours, as I write this, the Asian markets are crashing as well; European markets haven't opened yet.

As Jon Stewart would say, this is a financial catastrofuck.  On live TV.

Repeal VAT now!!!

Seems there is a serious battle over VAT these days. Even our bishops have joined the fray-- these days they seem to know what's best not only regarding reproductive health but also for the economy. That fuchsia cap must really have some power, being able to transform DDs into MDs and PhDs. But I digress.

Economically, removing VAT is like getting genital warts after a one-night stand: a quick relief you'll end up paying for for a very long time. So maybe we'll save P6/litre on gasoline overnight. Then Israel attacks Iran and the Strait of Hormuz is mined. Then Nigerian pipelines are blown up. Then another Katrina hits the Gulf of Mexico. Then China and India grow another 10%. And we're back to where we began, but this time with less revenues, a limping financial market, and a noncredible fiscal environment. Actually, those who stand to gain the most from this measure would be the dollar earners (i.e., exporters, expats, consultants, and OFWs) and those with substantial non-peso assets (i.e., those who diversified their portfolio away from the peso, probably expecting stupid shit to happen in this country again). So go ahead, make some people richer.

Strategically, though, calling for VAT's removal is brilliant. It's grandmaster-level chess. In game theoretic language, it strictly dominates alternative strategies. People like Roxas and Escudero must be thanking the high heavens that they have been given the opportunity to try this move. If they don't succeed, they'll still come out as pro-poor, compassionate, and, therefore, popular. If they do succeed and everything turns out rosy, they can claim all of the credit. If they do succeed and the economy goes to the dogs, they can always blame the President. You just can't lose with this move.

It's great to be a senator. All this power but responsible for next to nothing. Think about it-- they have no real constituency so they can't be blamed for anything, but they have national coverage so they can claim credit for everything they lay their hands on. Must be the best job out there. But I digress.

Therefore, since I don't want to lose, I say repeal VAT now! Then vote for me for senator. And do more one-night stands, but don't use condoms because they're evil as the bishops say. Yeah, a prescription for success.

It's official: poverty has worsened despite economic growth

The rumours have been flying in the economics circles for quite a while, but now it's official-- poverty has worsened between 2003 and 2006 despite "robust" economic growth. The National Statistical Coordination Board (NSCB) just released the results yesterday (read it here) with very little fanfare and very sparse analytical text (probably to discourage the more numerophobic reporters).

This finding is based on the 2006 Family Income and Expenditure Survey (FIES, n = 38,483 households), which is conducted every three years. First, let us define "poor". A family (NSCB's preferred term for household) is considered "poor" in 2006 if it had an annual per capita income of P15,057, or each member was living on P1,254.75/month. For a family of five, this would translate to a monthly income of P6,273.75. In 2003, the poverty threshold was P12,309 per capita, or P1,025.75/month for each family member, or a monthly income of P5,128.75 for a family of five (the difference in thresholds is due to inflation).

The 2006 FIES finds that:

• 26.9% of families were poor in 2006, up from 24.4% in 2003
• 32.9% of Filipinos were poor in 2006, up from 30.0% in 2003
• the number of poor families increased by 700,000 from 4.0 million in 2003 to 4.7 million in 2006
• the number of poor Filipinos increased by 3.8 million from 23.8 million in 2003 to 27.6 million in 2006

Now consider the following economic "achievements":

• real GDP growth was recorded at 4.9% in 2003, 6.4% in 2004, 4.8% in 2005, and 5.4% in 2006
• real GDP grew from P1.154 trillion in 2004 to P1.276 trillion in 2006, or a three-year growth rate of 10.6%

Therefore, during a three-year period that saw a 10.6% economic expansion, the number of poor Filipinos increased by 16.0%. Assuming a 2.36% annual population growth, the population would have grown 7.25% during the three-year period. So, crudely speaking, 7.25% of the 16.0% increase in poverty incidence can be explained by population growth, but 8.75% of it cannot (not-crude analysis to follow, hopefully). In other words, of the 3.8 million Filipinos added to the poverty headcount in 2006, roughly 1.7 million were the offspring of families that were already poor in 2003 and 2.1 million were from families that were not poor in 2003.

The recent "robust" economic growth, we can see, was not beneficial to the poor and, in many instances, detrimental to the borderline poor. Although the Philippine economic pie was enlarged, not a crumb of it went to the poor, instead benefitting... who knows. Worse, not only was there no trickle-down effect from "robust" economic activity, there might actually have been a trickle-up effect that extracted from the poor and borderline poor.

In other words, we have ourselves a pretty fucked-up situation.

Advice for Your Excellencies

Just read this story over at Inquirer: Bishop opposes QC birth control ordinance. Now, Bishop Ongtioco isn't the first bishop to oppose such measures, and I'm pretty sure he won't be the last. So to help the Magisterium engage the "anti-life" propagandists over at City Hall and various reproductive health centres, let me offer Their Excellencies some pieces of advice:

1. Stop confusing the laity by abortion-baiting (i.e., lumping contraception and abortion in the hope of transferring the distaste for the latter towards the former). There is a clear line between contraception and abortion-- even abortifacient drugs don't blur this line-- and you know this. Abortion-baiting is dishonest and condescending, something I'm sure Your Excellencies don't want to be.

2. Avoid making medical claims because, however we look at it, DD does not equal MD. Also, if Your Excellencies will point out that some contraceptives can raise the risk of certain cancers, you will be hard pressed to explain away the fact that contraceptives can reduce the risk of some cancers, and sex without contraceptives raises the risk of other cancers.

3. Emulate the great apologists like Justin Martyr and Irenaeus of Lyons by avoiding name-calling and sloganeering. Do you think the Athenians would have listened to St. Justin if he called them "boy-lovers", Your Excellencies?

4. Do not use "freedom of conscience" in your argument if you are trying to stop the dissemination of certain, even destructive, information. Free will can only be directed towards God if the conscience is given complete information, Your Excellencies. How holy is choosing the strait and narrow if the wide and broad was never shown?

5. Drop the argument that a teacher should be allowed to choose what she teaches based on her conscience-- this is a very treacherous slope. What applies to the Catholic teacher will also apply to the Jehovah's Witness teacher and the Iglesia ni Cristo teacher. Think about it, Your Excellencies.

6. Do not oppose humane, non-judgemental counselling and health care for anyone, even those you consider automatically excommunicated. Being humane and non-judgemental are good things, Your Excellencies.

7. Stop telling the laity how to have sex, Your Excellencies. Celibate men do not exactly make the best sex therapists, just like Stephen Hawking doesn't make the best track coach.

Ninoy must be rolling; Covetousness, Marx, and the WGA strike

It's so good when you can make a commentary just by juxtaposing quotes:

"I am not against the granting of a pardon to persons who deserve it. However, people who have refused to accept their guilt and have shown no contrition for the crime they committed do not deserve pardon."
-- Sen. Benigno "Noynoy" Aquino III, on the pardoning of ex-Sgt. Pablo Martinez who has been in jail for 24 years for the murder of former Sen. Benigno "Ninoy" Aquino, Jr.

"I am happy for former president Joseph Ejercito Estrada and his family. I pray that as a free man, former president Estrada will harness the lessons he had learned from the sufferings he had endured and continue to serve our less fortunate brothers and sisters."
-- Former Pres. Corazon "Cory" Aquino, on the pardoning of former Pres. Joseph "Erap" Estrada barely a month after his conviction for plunder.

***

On less idiotic and irritating news, it seems brain scans have shown that relative wealth (i.e., your wealth as compared with those around you) is a more important determinant of happiness than wealth level (i.e., what you can actually buy). This comes as no surprise to anyone who has envied someone else's stuff, or boasted one's wealth and watched others salivate in envy. However, this is an area in which mainstream economics still has to catch up.

Take any microeconomics textbook and you'll find that the utility(i.e., happiness) function, U(.), is defined as U(X, L) where X is a vector of goods and services and L is leisure time (sometimes L is even left out). In the Becker-type altruism models, you get U(X, L, V) where V(X, L) is some other person's utility. However, I have not seen a utility function that explicitly takes into account the impact of covetousness on utility. That part of utility that makes people want to get one over the other guy. This might sound crass and brutish, but, if you think about it, homo economicus is supposed to the paragon of selfish behaviour, so why not extend the description?

Among the early economic theorists, it was Marx who came closest to this concept of covetousness, albeit among classes rather than individuals. He acknowledged that it is possible for the material condition of workers and peasants to improve under the capitalist mode of production; however, their material improvement comes at the expense of their social position because the capitalists get rich even faster. This was confirmed by Kuznets (and lots of other later economists), who observed that economic growth exacerbates inequality-- everyone gets richer, but the rich get a bigger share than the poor.

Which brings us to the Writers' Guild of America strike, which has deprived me of my daily dose of The Daily Show with Jon Stewart and Late Nights with Conan O'Brien. It's a classic problem of splitting the pie-- the writers want a bigger share of the proceeds from their labour than the producers are willing to give. Eventually they will have to settle, but only after relative bargaining strengths have been determined.

I really hope the writers win this one, but chances are they'll get a small fraction of what they're asking for. The producers have time and options on their side, and eventually some of the starving writers (and not-so-starving writers like Ellen DeGeneres) will break the picket line and go back to work.

I think a better strategy for WGA would have been to conduct their strike one network at a time. Say, begin with CBS and close down all CBS shows but keep, say, NBC running. Ratings, along with advertisers, will flock to NBC and strike fear into CBS producers' hearts, making them likely to give in to the writers' demands. After CBS comes Fox, ABC, NBC, etc., all falling one after the other. It is the threat of advertiser flight that scares these producers, not work stoppage. The writers mistakenly believed that the product of networks is shows. The product of networks is advertising airtime; the shows are just there to attract ratings. By simultaneously stopping work all the networks were equally affected by the writers' strike, so there was no ensuing advertiser flight. For producers, it is relative position that matters in attracting advertising dollars, something that the WGA missed.

Which brings us back to the article on brain scans.

The Contrarian Gene

I read an interesting article over at BBC today: Human species 'may split in two'. It talks about the prediction of Dr. Oliver Curry, an evolutionary theorist over at the London School of Economics, that humanity will evenutally split into two strands-- the "tall, slim, healthy, attractive, intelligent, and creative" upper class and the "dim-witted, ugly, squat goblin-like" underclass. The article mentions the similarity with H.G. Wells' The Time Machine-- I haven't read the book but I saw the 1960 movie adaptation one late sleepless night.

Curry's notions of "upper class" and "underclass" have nothing to do with income or race; rather, they refer to the selection of sexual mates. He posits that as people become choosier about their sexual partners, hot+smart people will only choose to mate with other hot+smart people, while those who are fugly+dumb are left to mate among themselves-- a separating equilibrium with looks as a signal of health and intelligence, to use game theoretic jargon. Browsing Curry's work it seems he applied game theory in his analysis of evolution, and I have to say his analysis is consistent with the framework. It is an evolutionarily stable strategy (ESS) for the hot+smart set to mate with each other, leaving those not in the set (ergo fugly+dumb) to mate among themselves. One can argue that there are hot+dumb and fugly+smart people out there, but after eons of choosing mates the fugly+smart people will choose hot mates and hot+dumb ones will choose smart mates, eventually resulting in the separating equilibrium described by Curry.

I haven't seen Curry's paper on this theory (can't find it on the net), but I'd like to see how he tackles people who are "irrational" by ESS standards-- those that do not follow what reason tells them to do. While Darwinian natural selection is a slow but straightforward process, it is the contrarian mutations in a small percentage of people that makes the species leap and take sharp turns. These are the people who, from an ESS/rational standpoint throw all caution in the wind and think up or do new things. The contrarian gene that makes some people climb skyscrapers and jump out of planes is the same gene that led early man out of Africa and take to the seas. This contrarian gene is a wildcard-- it can either lead to destruction or greatness; the lack of it (i.e., doing the ESS all the time) leads to mediocrity.

Applying this to Curry's theory, if the hot+smart people are indeed the offspring of successful generations, I would guess that they will have a relatively higher proportion of people with the contrarian gene as they are descendants of geniuses and adventurers. Therefore, these hot+smart contrarians may not choose the ESS and instead mate with some of the fugly+dumb set. If this happens during the process of evolution, it will have implications on the separating equilibrium as described by Curry.

So this is the question that interests me in this and other economic theories-- how robust is it to "irrationality"? Will it stand if x% of people do not follow the ESS? How about x+1%? Theorists have to remember that in any situation where human behaviour is aggregated some proportion will not act according to the rules of rationality. There will always be contrarians in the mix-- those who go left when all reason says to go right-- who will mess up the outcome. We cannot simply assume away these contrarians because a lot of who we are today is an outcome of their "irrationality". After all, if everyone followed ESS we would all still be in Africa.

Survey Says...

Family, not sex, is Pinoys’ No. 1 source of happiness (from the Inquirer)
How Happy are Pinoys with Sex? (by Dr. Romulo Virola, Secretary General, NSCB)

Despite the titles, note that the results cannot be generalised in any way. The data are from a pilot survey among 167 nonrandom respondents taken from participants in a meeting; therefore, one cannot generalise these results to the general Filipino population (or to the meeting participants' population, for that matter). So no need to be surprised. Yet.

What surprised me is the write-up in the Inquirer. If you only read the write-up, it would seem that the results are from a full-fledged National Statistical Coordination Board (NSCB) study, which would make the study laughable given the sample selection and size. However, going to the source article by Virola, you get the sense that the results are from an informal study done after a meeting-- equal in generalisability to a Best Dressed survey. He repeatedly points out that the results are from nonrandom respondents as a caution to the readers-- a caveat lost in the Inquirer article. More importantly, Virola attributes the results only to the sample, while the Inquirer write-up uses generalising language ("among Filipinos")-- a glaring misrepresentation.

The Inquirer reporter should have stressed that the results were in no way generalisable; however, doing so would trivialise the article. Which is exactly the problem-- they were trying to make news out of a non-event. They could have referred to the results in passing as part of a bigger story on Filipino sexuality or sexual taboos. Instead, the results were made the story.

Having worked in media, I know the pressures of putting some spin in your article to ensure that it makes the press, particularly on matters as staid as statistical data. However, as someone who also does survey work, I draw the line at misleading the readers in interpreting the data. Reporters have the responsibility to aid the readers in reading the data and lay out any and all caveats to interpretation. Statistics are difficult enough to understand and malleable enough to be spun; we don't need to add misrepresentation to the mix.
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Below are the results of the nonrandom pilot survey, taken from NSCB:

What ryhmes with "Aumentado"?

From inquirer.net: Boom Boom's village loses road project after boxer's loss

So Gov. Erico Aumentado of Bohol (seen right) will cement the provincial road connecting Can-uling to the rest of the world if and only if boxer Rey "Boom-boom" Bautista becomes champion. Wow. I was thinking of some analogy that will show the absurdity of the situation, but, man, nothing beats the real thing.

In his message on his official website, he describes Bohol as the "Island of History and Natural Beauty". Yeah, nothing harks back to the rustic pre-colonial days like a dirt road.

So, what rhymes with "Aumentado"? It'll come to you.

Quote of the Day

"No disciple of any school of economics can afford to close his eyes to a new discovery, obtained from another point of view, which will not fit in with his own ideas, nor must he treat it as unimportant, if not incorrect."

Henry Schultz

28 December 1926

The Journal of Political Economy, Vol. 35 No. 5 (Oct. 1927), pp702-706

Re: Filipino Theory of Value

My good friend Out in Four had an interesting thesis in his blog. I wrote this as a comment, but it got too long so I'll just it post here.
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It is always interesting when anthro and econ meet. A few comments:

1. Material conditions and language do not work in a single direction (i.e., material conditions affecting language); it's more of a two-way interaction. Material conditions do affect the language (e.g., our many words for rice-- palay, bigas, sinaing, bahaw), but the language also affects the way we perceive the world (e.g., our word for sickness is sakit, which is also pain, so mental health is often neglected or trivialised). And this is most true for abstract concepts. Therefore, even if you find significant correlations, it will be difficult to establish causality. Did the language develop because they traded, or did trading develop because the people were open to it?

2. Note that most of pre-Hispanic trade was barter rather than in money, so "expensive" might be a very different concept for the early Filipinos (it would be more akin to marginal rates of substitution rather than actually being "expensive").

3. In any study of culture you will always find exceptions, so explaining them within the theory would be very difficult. And unlike other statistical anomalies, it wouldn't be possible to explain them away as outliers-- how does one consider a language or culture as an "outlier"? Could we disregard an entire Weltanschauung because it isn't like any in the rest of the world?

4. Filipino (i.e., Tagalog) is part of the Austronesian family of languages, so a lot of our words would be the same with, say, Bahasa; however, trading circumstances would be vastly different across groups. In many cases, there is more diversity between languages within the Philippines than between other countries (e.g., compare Ivatan and Panggalatok vs. Tagalog and Bahasa). So the results will be driven by how the sample is selected. The results will be different if we compare the different Austronesian languages or if we include, say, Indo-Eurpoean languages into the mix. Not to mention that a lot of our words came from Chinese and Indian (including mahal), so the lines get even more blurred. Cross-section analysis can't be done on data where the supposedly random samples are talking to and influencing each other.

5. Also consider the case of the Maranaos and the Maguindanaos-- almost identical languages, religions, social structures, etc., but the former are prolific traders and the latter are not.

Bottomline, your thesis is interesting, but very difficult to test. Obviously, I'm very much into the study of econ and anthro (the two extremes of the social sciences, actually) and have given this some thought-- studying both makes one aware of the limitations of each. The way I see it, Economics has a long way to go before it is crowned Queen of the Social Sciences.

I, Consumer

I read an interesting book review in The Guardian website on Consumed: How Markets Corrupt Children, Infantilize Adults and Swallow Citizens Whole by Benjamin Barber. Now, I haven't read the book myself since I haven't had the chance to buy it (can anyone point me to a copy?), but the brief review gave me enough points to ponder.

I won't tackle the book's premise of consumerism being the offshoot of capitalism-- the transition from being a demand-driven economy to being a supply-driven one (i.e., so that "new needs have to be invented") wasn't discussed amply enough for me to comment. It wasn't clear whether advertisers just amplify trivial wants that are already present, or they actually goad consumers into wanting things they didn't want before. Maybe (hopefully) the book tackles this better. However, the review moves on to a more interesting point:

"...Barber moves things on by fingering what he calls the 'infantilising ethos' at the heart of consumerism. The perfect consumer, he says, is like a toddler: unable to defer gratification, lacking empathy, clinging to material objects for security, wanting to be told the same stories over and over again.

xxx

"Consumerism, in Barber's view, exploits the unsophisticated and voracious demands of children and makes adults emulate them. It actively promotes the pursuit of bliss through ignorance. It is fundamentally hostile to history and metaphysics, to anything in fact that might intervene in a citizen's consciousness and make him aware of the difference between what he wants now, as an individual, and what he might want in the long-term, or for society. So, for example, he fancies another cheeseburger, but he would also like a healthy cardiovascular system. He wants an SUV, but he also wants a temperate planet. Consumerism makes it imperative that he choose McDonald's and the Range Rover."

This actually goes to the heart of microeconomic theory: the assumption of stable preferences. Suppose there are three possible options: x, y, and z. A rational individual should have opinions on the three options and be able to order them accordingly, say x > y ~ z or x > y > z (> means "is preferred to" and ~ means "is indifferent to"). Also, if an individual orders the options as x > y and y > z, then this should imply that x > z for him to be rational.

What Barber seems to say is that an individual may have x > y > z, but then advertisers come along and change them to z > x > y, and another one comes along to turn them into y > x > z. Although economic theory already allows for changing tastes, most economic theory still needs the assumption of stable preferences-- calculus would just be impossible without the bedrock of stable preference relations (in other words, the number line). Moreover, Baker says that these changes are not necessarily the outcome of rational thought processes; rather, they are more similar to the "unsophisticated and voracious demands of children", easily swayed with just a little teasing.

This has two important implications. First, in a consumerist world, should all economic theory be modelled to allow changing preferences? Static models can still hold; i.e., there would be no problem if we stick our analysis to an individual's decisions at a single point in time. However, all analysis involving time horizons will have to change-- consumption smoothing decisions on day 1 won't make sense if the individual can't be expected to stick to them on day 2. More importantly, can we even find a way to model and test these changes in preferences? Is there a way to measure the impact of advertising on a person's consumption decisions? Which brings us the the second implication

Measuring and modelling preference changes assumes some kind of rationality in the way individuals interpret and digest information (i.e, advertising)-- a system of cause and effect if you will. But what if individuals are really childlike in their preferences and supposedly rational adults don't know what they want? What if at the decision point the relations between x, y, and z are still changing? In this case, axioms on revealed preferences do not even hold-- choosing x over y doesn't necessarily imply that x is preferred to y because the individual was just as likely to choose y over x at the decision node.

So what now? Well, obviously economic theorists should do a lot of introspecting regarding the basic assuptions that are held so dear. Homo economicus might need a serious makeover to render economic theory more than just a thought exercise. What economists now consider as "irrational" behaviour for Homo economicus might actually be the norm for many (or most) decisions made by Homo sapiens.

But more importantly, we as consumers should start thinking about our decisions and preferences. Do we even know what we want? How and how much do advertisements influence our decisions? What do we really derive from the goods that we consume? Are we now increasingly defined by what we consume?

I consume, therefore I am?
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Thanks to dr. sbdink for thinking of the title.

Tit-for-Tat

It seems we're back to the old game. Russian President Vladimir Putin said recently that they may point their missiles at European targets in response to American plans to set up missile defenses in Eastern Europe. Although the Russia-US word war has been going on for months, this is the first time Putin has made such a strong threat.

First some background: the Anti-Ballistic Missile Treaty was signed by the United States and the former Soviet Union in 1972 to put a halt to the Cold War arms race. One of its basic principles was mutually assured destruction (MAD)-- any country that launches a nuke could expect a quick and equal retaliation, making both countries unlikely to press the trigger. Thus, an important stipulation of the treaty was a ban on missile defense systems that would render MAD inapplicable, which would increase the likelihood of a first strike and foment an arms race to overwhelm whatever defense system is in place. However, in 2002 the US unilaterally pulled out of the ABM Treaty, saying it needed to develop missile defense systems to fend off possible attacks from Iran or North Korea.

An important assumption in MAD is the rationality of all parties-- an irrational player could still launch and not care about the consequences. During the Cold War there were only two nuclear-armed parties to consider-- the United States (and its satellite states in NATO) and the Soviet Union. Both parties were rational even if brinkmanship was a common game (think Cuban missile crisis).

For a presumably rational US to pull out of the ABM Treaty it had to believe that other irrational players have come into play, in this case Iran and North Korea. Both Iran and North Korea have long-range missile capabilites (none can hit the US mainland), and North Korea has confirmed nucelar capabilities albeit still weak. Thus, the US is willing to risk the ire of rational Russia to fend off the threat from potentially irrational and nuclear-armed Iran or North Korea.

So is this calculus correct? Well, it is true that there are now more players in the nuclear game, but only two pose a serious threat to the United States-- Russia and, to a lesser extent, China-- and they're both rational players. Iran has no demonstrable nuclear capabilities as of now, and its missiles can only reach as far as Israel (it won't think of hitting Arab countries, Turkey, or Russia). Iran has not shown any tendency towards irrational behaviour, and all its strategies seem to be in line with rational thinking. On the other hand, North Korea can theoretically hit Alaska if it's lucky; its missiles are more likely to hit the ocean assuming they can get them off the ground. While North Korea has shown bouts of irrational behaviour in the past, this can be viewed as part of its brinkmanship strategy which, rationally speaking, it has played so well.

It does not seem that the US is in any serious threat from ICBMs, so why build defenses in Eastern Europe and bring back Russia into the tit-for-tat game? A missile defense against Iran should be placed in Israel, not Eastern Europe. On the other hand, missile defenses against North Korea should be placed in California, Canada, and Alaska. Moreover, the biggest nucelar threat to the US is not from ICBMs or cruise missiles, but from dirty bombs carried by Al Qaeda and its sympathisers. The Eastern Europe defense shield will be useless against backpack nuclear bombs.

While the US may have valid concerns over nuclear proliferation, it seems that its decision to irk Russia by building nuclear capabilities in its doorstep is a miscalculation of the costs and benefits. It gains very little in facing its stated security threats, but loses a lot in terms of a new arms race with Russia (and China). Russia has already tested new missiles designed to thwart the latest American missile defenses, so the first step in a new arms race has begun.

The irony of MAD is that when one party tries to eliminate the ability of the opposing party to retaliate, it increases the likelihood that the other party will strike first because failure to do so will ensure its exclusive destruction. So in trying to eliminate a threat (real or imagined) from small players (Iran and North Korea), the US has significantly increased the threat from a big player (Russia). Moreover, the clear and present threat from the truly irrational player (Al Qaeda) is in no way mitigated by this strategy.

Makes one wonder who is really the most irrational player in this game.

The Libertarian Reader

It's been a long time since I last posted-- been very busy lately. Will try to make up in the next few weeks while my boss is on leave. Hehehe.

A few weeks ago, my good friend cyberlaundry gave me three books (thanks, Seiji!), one of them being The Libertarian Reader. Very interesting book, at least based on the table of contents. Nice reads, especially in a world increasingly dominated by neocons and radicals.

Hopefully I'll be able to browse through it soon.

Of Port Wine and David Ricardo

Last night I received a Balikabayan Box from my folks in the US. In it is a bottle of Dow's 10-Year-Old Tawny Port, courtesy of my sister (thanks!). True port wine comes from the Douro Valley region in Portugal and is actually a mixture of old and new vintages, so 10 years is the average of the vintage mix.

Although port comes from Portugal, most of the popular and established port brands have English names: Croft, Dow, Graham, Sandeman, Taylor, Warre. This is because England and Portugal have been traditional trading partners since the 1300's, a partnership reinforced during the Franco-English wars (starting from the 17th century) when England banned trade from France. (France and Spain, on the other hand, became close partners; even their monarchs eventully came from one family-- the Borbon/Bourbon dynasty.) So when French wine was banned from English stores, English traders turned to Portugal for substitutes. These traders eventually established port houses to make production of port wine more efficient and facilitate its trade-- multinational companies in today's terms. These English port brands are the names of those port houses.

David Ricardo, the father of modern trade theory, wrote On the Principles of Political Economy and Taxation in 1817 within this context of vibrant trade between England and Portugal. Though he never used the term comparative advantage in his text, he illustrated this truly nontrivial concept in his classic example:

"If Portugal had no commercial connexion with other countries, instead of employing a great part of her capital and industry in the production of wines, with which she purchases for her own use the cloth and hardware of other countries, she would be obliged to devote a part of that capital to the manufacture of those commodities, which she would thus obtain probably inferior in quality as well as quantity.

"The quantity of wine which she shall give in exchange for the cloth of England, is not determined by the respective quantities of labour devoted to the production of each, as it would be, if both commodities were manufactured in England, or both in Portugal.

"England may be so circumstanced, that to produce the cloth may require the labour of 100 men for one year; and if she attempted to make the wine, it might require the labour of 120 men for the same time. England would therefore find it her interest to import wine, and to purchase it by the exportation of cloth.

"To produce the wine in Portugal, might require only the labour of 80 men for one year, and to produce the cloth in the same country, might require the labour of 90 men for the same time. It would therefore be advantageous for her to export wine in exchange for cloth. This exchange might even take place, notwithstanding that the commodity imported by Portugal could be produced there with less labour than in England. Though she could make the cloth with the labour of 90 men, she would import it from a country where it required the labour of 100 men to produce it, because it would be advantageous to her rather to employ her capital in the production of wine, for which she would obtain more cloth from England, than she could produce by diverting a portion of her capital from the cultivation of vines to the manufacture of cloth.

"Thus England would give the produce of the labour of 100 men, for the produce of the labour of 80. Such an exchange could not take place between the individuals of the same country. The labour of 100 Englishmen cannot be given for that of 80 Englishmen, but the produce of the labour of 100 Englishmen may be given for the produce of the labour of 80 Portuguese, 60 Russians, or 120 East Indians. The difference in this respect, between a single country and many, is easily accounted for, by considering the difficulty with which capital moves from one country to another, to seek a more profitable employment, and the activity with which it invariably passes from one province to another in the same country."

Thus giving port wine a permanent place in economic theory.

GO's 10-point Economic Plan

The Genuine Opposition (GO) today unveiled their 10-point economic plan. Here's their plan (in italics), and my comments, in a nutshell:

1 - Generate more jobs through labor-intensive infrastructure projects in the rural areas.
I am not a civil engineer, but I think most infrastructure projects are already labour-intensive. Despite the use of cranes and cement mixers, current technology still needs people to actually do the building. What technology are they talking about here? The pounded-earth method to build walls and dikes? But in any case, infrastructure projects need money, so to do this they should either increase revenues or reallocate current revenues from other departments. See #5.

2 - Increase budgetary allocations for education at all levels.
No argument here; we do need more money for education. Again, this needs money, so to do this they should either increase revenues or reallocate current revenues from other departments. See #5.

3 - Substantially lower the cost of medicines.
How do they plan to do this? Parallel importing? Promoting alternative medicines? Imposing price caps? Nationalising pharmaceutical companies?

4 - Lower the costs of transportation and power through the development of domestic sources of renewable energy.
I hope they realise that "the development of domestic sources of renewable energy" will be quite costly in the short term. R&D of new technology is just the beginning; add to that the replacement and adaptation of current technology to the new technology. Again, this needs money, so to do this they should either increase revenues or reallocate current revenues from other departments. See #5. (Is it obvious I'm copying and pasting here?)

5 - Reject any new tax and improve tax administration.
Whoa! So they plan to do a lot of projects with a lot of spending without increasing taxes. So which department or budget item are they going to squeeze dry? And how do they plan to improve tax administration over and above what's being done now? How much additional income (net of additional administrative costs) do they expect to get after improving tax administration?

6 - Grant prosecutorial powers to the Commission on Human Rights and de-emphasize the heavily militarist approach in counter-insurgency.
Not really an economic plan, but fine. I don't see why the CHR can't file cases against human rights violators now, but if they think this will help then so be it.

7 - Contribute to the arrest of global warming.
How??? By doing #4? By pressing the US to ratify the Kyoto Protocol?

8 - Organize additional support programs for overseas Filipino workers.
Ok, fine. Again, this needs money, so to do this they should either increase revenues or reallocate current revenues from other departments. See #5.

9 - Reinforce the role of the press as watchdog against graft and corruption by decriminalizing libel and increasing penalties for harm done to news persons.
Wait, decriminalize libel??? This is a non sequitur. There is nothing that shows that the threat of libel causes journalists to abandon their watchdog role; rather, the threat of government persecution or censorship often leads to more courageous journalists. Cases in point: the Mosquito Press during Marcos and the PCIJ during Erap. What leads to the abandonment of the watchdog role is the presence of corruption in the media, a.k.a. "envelopmental journalism". The threat of libel does not muzzle the press; money does.

10 - Institute other meaningful economic reforms.
Like what?!? Talk about motherhood statements.