Friday, 31 July 2015

Landsburg's imbecility is envy-free.

Steve Landsburg has a remarkable record of consistency when it comes to saying the stupidest thing possible about any given economic concept.
Yet, he is a happy camper. He shows no envy of less imbecilic Professors. How has he attained this blissful felicity?

But first, why not sample the nitwit's sublime silliness for yourself?

Suppose you’ve got 1000 students to assign to two schools, each with 500 slots available. Everyone prefers the Good School to the Bad School. Which of the following is a fair way to decide who goes where?
Method A: Give each student a coin to flip and count on the Law of Large Numbers to insure that just about exactly 500 will flip heads. Those students go to the Good School.
Method B: Randomly assign each student to one of two groups. Then flip a single coin to determine which group goes to the Good School.
Method C: After taking note of the fact that, coincidentally, exactly half the students are white and half are black, flip a single coin to determine which race goes to the Good School.
Method D: Assign all the white students to the Good School.
....Economists often interpret fairness to mean that the mechanism should be envy-free, meaning that at some stage in the process, no student wishes he could trade positions with another. Certainly that’s true of Method A, where everyone gets a fair coin and there’s no reason to prefer your neighbor’s coin to your own. And certainly it’s true of Method B, where we’re assigned to our random groups and all await the outcome of the same coin flip. And certainly it’s true of Method C, where the groups are race-based but once again, we’re all awaiting the outcome of the same coin flip. On the other hand, it seems to be quite untrue of Method D, where all of the black students believe (correctly) that they’d be treated better if they were white.
Do economists really believe that I won't envy you for getting a Maserati while I get mugged just because a coin-toss determined that outcome? Does a gambler who loses not feel jealous of the one who wins?
No. Of course not. That would be silly. Wikipedia says 'An envy-free division is a division of a resource among several partners such that every partner feels that his allocated share is at least as good as any other share.'
As I say in my comment on his blog-‘the mechanism should be envy-free, meaning that at some stage in the process, no student wishes he could trade positions with another’
That’s not what envy-free means. The stages don’t matter. Only the final allocation. Thus so long as one School is better than the other, no allocation is envy-free. Resources need to be concentrated on equalizing the Schools for envy-freedom to obtain. Alternatively, the cost- whether monetary or in terms of acquiring relevant entry qualifications or in terms of staying the course- has to be differentiated.
Landsburg, assuming I'm illiterate and can't look up Wikipedia immediately replies-
Steve Landsburg
@Vivek (#39): I think you’ll find that if you look at the paper I linked to, and related literature, the phrase “envy-free” is used as I described
My mild rejoinder, of course, will never be approved on his blog, so I quote it here- 'I found mention of ‘justified envy’ being traded off with efficiency in the context of TCC, in the paper you referred to.
Wikipedia defines envy free in the traditional cake cutting context or Baumol ‘super fairness’ literature I am familiar with.
Perhaps you are referring to a specialist literature that has arisen recently in which envy freedom is a function of a stage rather than the final outcome of an allocation process.
Such a literature would be ab ovo absurd. I play poker with you. You take all my money. I am envious of you even though the game was fair.
Envy freedom or Superfairness can only arise in the context of heterogenous outcomes if there is an underlying preference diversity or information asymmetry of a certain type.
In this case, it is irrelevant how you were chosen for a particular School. All that matters is whether no agent wants to change outcomes with anyone else after completing School.
Why not speak of ‘resentment’ rather than use the term ‘envy free’ (which in fact is not used in the paper you link to)?
I appreciate this is an emotive subject and one full of re-switching type paradoxes as Thomas Sowell discovered, still for the sake of students of Economics reading this it might be as well to stick to conventional usage.'
(That last sentence in my first comment re. Regret Minimization and Envy Freedom needs to be qualified and I will do so in my next post.)

Landsburg thinks tossing a coin is enough to make any outcome whatsoever proof against envy. But if you accept his notion of envy freedom there is no need for any coin toss.

Define Good School as that which has alumni who suffer a sense of shame when they say stupid things and who envy those of their peers who say sensible things. Define Bad School as that which has alumni who are happy imbeciles. Landsburg belongs to the latter school. Far from envying his sensible colleagues he happily hurls his feces at them in the belief that he is scoring a great intellectual victory. Yet, no one tossed a coin to send Landsburg to the Bad School. If final outcomes don't matter, envy is meaningless.

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