1. Science: Notes for a book on how to think about the fundamentals of economics scientifically, including behavioral micro-foundations, how these contradict the fundamental welfare theorems, and misleading interpretations of math econ.
  2. BehaviorUtility theory has always assumed a functional that excludes consumption and actions by others. It assumes people are sociopaths. I have never seen this mentioned in any text. Since about 1990 this has been changing, but the next best theory is still shaky. Experiments are improving.
  3. Climate: We are conducting behavior experiments to demonstrate that the climate negotiation game can be improved to substantially reduce the free-rider incentives that have stymied negotiators for 20 years. (priceCarbon, Paris Climate conference)
  4. Electricity: Amateur economists still dominate discussion of the adequacy problem, and sell the nostrum that economics says unfettered spot markets will induce “optimal capacity” of the variety needed for adequacy.


Why Is OPEC Letting The Oil Price Crash?

Jan 31, 2015. History is the key. In 1980, the Saudi's oil minister, Yamani, warned OPEC it was trying to keep the price too high. They didn't listen, and all agreed to cut production. The Saudis did, but the rest cheated. To hold their cartel together, the Saudis cut supply even more than promised, but the high price reduced demand and called forth North Sea and Alaskan oil. By 1985, the Saudi's were pumping at about 30% of capacity and [Read more...]

Hofstadter's Super Rationality

Dec 28, 2014. Climate negotiations are a sort of prisoner's dilemma, so we need to find a way to change the game or change the outcome of a prisoner's dilemma. Hofstadter proposes that if we can induce players to be "super-rational" we may get a more cooperative outcome. Does this make sense? [Read more...]

What Lima Missed

Dec 17, 2014. Had the players noticed the red flag thrown onto the climate field shortly before the Lima conference, they might not have continued to play a meaningless game. The flag was the joint US-China climate pledge, which will cover 40% of global emissions under the upcoming Paris agreement.

The US pledge is a mere aspiration, and China's pledge, as explained below, shows no climate ambition whatsoever. [Read more...]

A Real Prisoners' Dilemma

Oct 13, 2014. Kane and Nestor exploited a bug in video poker machines to win hundreds of thousands. So the casinos had them arrested. But the Fed's case began to fall apart. No, they had not hacked any computers. [Read more...]