Tag: paradox

Murray Gell-Mann Amnesia and the Vodnoy Paradox

I’ve written about the Murray Gell-Mann amnesia here before. The idea there is that you trust whatever is printed in the newspaper, except for the section which is your domain of expertise. And despite the newspaper falling short in this section, you read the rest of the newspaper as if everything there is “correct”.

Yesterday I came across a similar idea when it comes to big government – what University of Nebraska economist Arthur M Diamond calls as a “Vodnoy Paradox” after his optomerist – it’s basically about big government advocates who advocate big government in all fields except for the one they’re expert in.

Government regulations sound plausible in areas where we know little and have thought less. But usually those who know an area well can tell us of the unexpected harmful consequences of seemingly plausible and well-intentioned regulations. As a result, the same person often advocates government regulations in areas in which they are ignorant and opposes them in areas where they have knowledge. I call this the “Vodnoy Paradox.” 

In the field they’re expert in they know that regulation doesn’t work, or is misguided, yet they support regulation in all other fields. Isn’t this just Murray Gell-Mann Amnesia in a different context? (quote via David Henderson of Econlog)

The service marketplace paradox

This came out of a conversation a few weeks back, and resurfaced in a conversation yesterday. There is a fundamental paradox in service marketplaces – the more useless the general quality of service is, the more useful the marketplace. Let me explain.

Let us take the market for plumbers, for example. There are several hyperlocal service marketplaces in India (like HouseJoy or LocalOye) which supply plumbers on demand. Their biggest challenge is offline transactions (as this article about US-based HomeJoy describes) – once two sides of the market are introduced to each other, they take further transactions online.

Thus, there is a huge amount of activity and value taken offline once the introduction has been made, as the long tail of the client/pro relationship takes hold. Clients are perpetually motivated to move their pro relationships off platform, because it’s one less intermediary to go through to directly access the pros they love.

In other words, once I’ve discovered a plumber through HouseJoy (for example), and find his work to be good, the next time I need a plumber I’ll simply call him rather than call HouseJoy (cutting out the middleman). If the plumber is reliable and produces reasonable service, HouseJoy has practically lost me as a customer for plumbing services for a long time.

On the other hand, if the plumber I used the first time is good but not reliable (doesn’t arrive on time the next time I call him), I’m likely to use HouseJoy (or a competitor)  the next time round. In other words, the worse the service providers are (in terms of reliability, not quality of work), the greater the likelihood of the platform getting business!

This is the fundamental paradox of service marketplaces. When services are reliable, you don’t need a marketplace. So if you need a marketplace only if services are unreliable, the server side of the marketplace is full of unreliable people. The hope, and the value that the marketplace adds, is that by aggregating a bunch of unreliable people, some level of reliability is guaranteed. The question is how sustainable this is.

Think of this another way – the level of reliability offered by a marketplace can be described as the sum of reliability of service providers and reliability of the marketplace itself. So for a given level of overall reliability, the marketplace adds more value if individual service providers are less reliable!

Extending this model to other marketplaces and services is left as an exercise to the reader. Feel free to use the comments section to write your analysis.

 

Traffic signal policy

Is it fair on the part of the city government to direct people’s choices of routes by imposing a suboptimal timing plan on a traffic signal? Or is the government supposed to respond to demand and design the signals looking at the traffic in various directions? Which is supposed to lead which? Which is the hen and which is the egg?

Yesterday I passsed the airport road – victoria road T-junction on the way to office and noticed that the average perceived waiting time on the Victoria road side was significantly higher compared to that of the two branches of the Airport Road meeting there, which was clearly inefficient. Though it is very likely that it has come about because of a generally poor design of the signal, it could also be by design – because the government wants to disincentivize people from using that route.

Given that we are not yet at the libertarian ideal of  “private roads for everyone”, in most municipal regions, the government has the responsibility to build and maintain roads. And given constraints such as the Braess’s Paradox, occasionally it might actually make sense for the government to occasionally direct traffic, rather than leaving it for a free-for-all. I suppose efforts such as converting roads into one-ways are in the same direction.

So given that the government has the monopoly to “give” roads, does it have the right to “take” away roads? If it does, it means that it is effectively trying to control how and where people move. Isn’t that against stuff like freedom of movement? It’s kinda scary.

But if the government doens’t have the right to “take away” roads, what happens to stuff like one way roads, etc.? After all, when you make a road one way, you are imposing a higher cost on certain people (who are willing to brave the heavier traffic in order to move in the “opposite” direction so that the total cost to society at large goes down. Sinilarly, when you put a road divider, you cut off access to certain intersections which would have been very convenient for some people in the larger interest.

So does an elegant solution exist to this problem, assuming that we cannot put tolls on all roads? In principle, putting tolls on roads is fair because we are already taking toll from motorists in non-monetary ways – such as by not maintaining the road, or by subjecting them to too many intersections, or by allowing so many vehicles on the road that reduces the speed of the road. Given all these costs that are imposed on motorists, monetizing them is not tough in principle.

However, politically it is a huge issue and is unlikely to happen for several years to come. In this context, does there exist an elegant solution to traffic management and regulations, that can compensate for inconvenience caused to people in the name of interest of the society-at-large?

You know, I have this condition

My memory cache (talking about my memory, not my computer’s or my laptop) seems to have suddenly diminished. My life seems to have become very Markovian. In fact, a few months back, I used to think that a Markovian existence is the best kind of existence, since in that kind of a situation, you respond to every situation on instinct, don’t make plans, are always on the lookout to optimize, etc. Now that I’ve actually reached close to that state, I don’t know if it’s desirable.

So basically my already weak short-term memory has become weaker. I’ve already talked about one paradox – I’ve traditionally had great long-term memory but awful short-term memory. I remember strange things, dates when those things happened, the colour of the shirt I was wearing when certain things happened, etc. And I typically can’t remember much of what someone told me recently, or what my mom asked me to buy at the market. The explanation I give myself for this is that I’m weak with details – and missing out on details is not as critical when you are talking about long-term stuff as it is in the short term.

Anyways what has been happening to me of late is that days seem very long. Towards the evening of most days, I really can’t remember what I did that morning. Ok, it’s not that bad – I can remember with some effort, but that effort is approximately equal to the effort required to remember what I did a year ago or some such. Once I get into doing a certain activity, I completely forget about everything I was doing prior to that particular activity – it all goes into memory, rather than staying in cache (like it used to earlier).

The most interesting (and scary) part of the deal is that my memory loss seems to be especially bad when it comes to numbers. This evening, I was out shopping for a computer table. I checked out stuff at some four shops, but as soon as I entered one shop, I completely forgot about the prices quoted in the previous shop. So I actually didn’t have a handle on comparative price. Tomorrow, I’ll mostly go buy that table which I liked best, and trust the shopkeeper to rememeber the price that I’ve bargained.

Considering that I’ve traditionally been a “numbers guy” and have a good eye for numbers, this is extremely scary. I just hope it’s some minor problem caused due to something like lack of sleep (i sleep only 8 hours a day) or hunger (i eat at least 6 times a day) and not something more serious. For example, I use a prepaid mobile phone. And each time after a call or a message I see the balance, I don’t know how much I’ve spent becasue I don’t know the previous balance. I remember that the last time I used a pre-paid phone (the same number; back wehn i was at IIMB) I would meticulously keep track of expenses.

While the condition lasts, I seem to be enjoying myself. Days seem so much longer, so I can relax so much more in the given time. I occasionally feel bored, but quickly find myself something to do, and get engrossed in it. I don’t get easily distracted like I used to. I don’t multitask (earlier I was a compulsive multitasker). I’m able to concentrate again, like I used to during the days of blindfold chess in the backbench. I don’t get worried. I don’t remember a thing from my previous jobs – though I’m sure I can pull it up from secondary memory if absolutely required.

But you know, I have this condition..