Pool anchors

I just started reading Predictably Irrational, by Dan Ariely, and I'm already impressed. Professor Ariely does behavioral economics research at MIT; he runs experiments to show that we often act irrationally, comes up with a hypothesis that might explain why, and then runs more experiments to test his hypothesis.

For example, he shows that we easily get "anchored" to prices; the amount of money you're willing to pay for something is often not really related to how much value you'll get; instead, you'll probably be willing to pay whatever you paid before.

It's a mental shortcut we all unconsciously make. And establishing the initial anchor price can be surprisingly arbitrary. The book describes an experiment where the anchor prices were strongly influenced merely by asking people to write down the last two digits of their social security number and asking "would you pay that many dollars for this?".

I think we're seeing this anchoring effect in the discussions of the Town budget.

Here's a thought experiment:

Imagine a town about the size of Amherst, in the same sort of budget squeeze. You're in charge of that town's budget, and you're looking at about $600,000 in cuts to make your 60 million-dollar budget balance.

A group of citizens approaches you and asks that you spend a measly $90,000 or so on some very good programs-- a second swimming pool downtown and funding for several local human service agencies.

Would you find a way of cutting another $90,000 from your budget to fund the new programs or not?

I would not. I'd argue that the town survived last year without those things, but that we couldn't afford them in the current budget crunch. I would guess that most people would agree.

What would Town Meeting say if I proposed that we carve another $20,000 out of this year's budget to make a really great ice skating rink in Kendrick Park (with skate rentals and hot chocolate maybe...) next winter?

We're irrationally anchored to the things that we already have, and that makes it really hard to give them up even though there might be other, higher-priority things we could (and should!) invest in. I'll keep reading Predictably Irrational; I'm hoping Professor Ariely will give some strategies for overcoming our irrational tendencies.

John discovers irony

John McCain can't get out of public campaign financing because the Federal Election Commission can't meet because they don't have enough members (because some Senator named Barack put a hold on a nomination...).

So Mr. Campaign Finance Reform gets tripped up by the rules he helped pass. Oops.

Unfortunately, we'll probably see Yet More Rules to fix the problems with the first set of rules. "This time, we've got Campaign Finance Reform right!", they'll say. Until the lobbyists and special interests figure out how to game the new system, and we'll be right back to where we started.

Ian Ayres and Bruce Ackerman have a much better idea for true campaign finance reform:

We think that each candidate for office should open a "blind trust" with the election authorities into which all private donors must deposit their money. Politicians will no longer be able to determine who has given how much. As a consequence, it will be impossible for them to know whom to reward with special-interest legislation.

Money buying political influence is what all the campaign finance rules are supposed to prevent, right? So why not just make campaign donations anonymous; seems like a simple, clean solution to a messy problem.

School Budget Transparency

Will and Robin are in kindergarten and first grade at Wildwood, and yet I find I don't have a lot to say about Amherst's public schools.

The "cost" side is easy, thanks to the Massachusetts Department of Education web site. Amherst spent about $14,000 per elementary school pupil, and the regional school district spent about $15,000 per middle/high school pupil. Yay for budget transparency and accountability! (if only the Massachusetts State Budget was available online in a user-friendly form...)

I'm not an expert on educating children, and I don't trust anecdotal evidence, so I have no idea whether or not Amherst's schools are doing a great job educating them or not. Amherst kids do better than average on the MCAS and NCLB tests, but is that because the schools are better or because the families in Amherst are better?

There's a $700 per pupil budget gap in the Elementary school budget. And an override ain't gonna happen this year.

It seems to me we should spend more money per elementary school pupil than we do per middle/high school pupil; the research I've done shows that giving students small class sizes in grade K-3 makes them perform better in later grades. If I were King, I'd cut the regional school budget by a million dollars and give it to the elementary schools. I think I'd say that even if Robin and Will were in 10'th and 11'th grades, but I don't know what it would be like to have to tell a petulant teenager that they can't take Russian next year because I voted to cut their school budget to hire another kindergarten teacher or three.

Would it be evil if...

I sent email to my State Representative a couple of months ago, asking for some general information about the State budget. I followed up by sending her snail-mail a couple of weeks ago, asking the same questions, but still haven't had a response.

I'd like to figure out if she's ignoring me or if, maybe, she's just overwhelmed with mail. Would it be evil of me to send another email asking, say, what the campaign donation limit is for State campaigns, and if it's too early to donate to her election campaign, and then seeing how long it takes to get a response?

It's sneaky, and potentially embarrassing, and kinda mean, so I'm reluctant to do it.

But I'm really, really tempted...

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UPDATE 16 Feb: I gave into temptation, and sent her another email a few days ago. No reply yet, so maybe she just doesn't respond to email. Or postal mail. I suppose I could call her and ask her about the State Budget, but I kinda doubt she's got all the numbers memorized.

Superpower Skeptic

Here's a thought experiment: would it be so terrible if the United States stopped being the world's military superpower?

What would happen if we reduced defense spending down to the level of, say, Australia (the 13'th largest defense budget in the world)? The US spends over half a trillion dollars a year on the military, Australia spends 14 billion dollars a year-- or roughly half a trillion dollars less than the US.

I was born in Australia-- it's a very nice country. As far as I can tell, Australia isn't suffering because it's not the World's Number One SuperPower. Like the US, it doesn't share any borders with unfriendly neighbors (but my mum tells me that a big worry down under in the sixties was the "Yellow Peril"-- that Chinese overpopulation would force them to invade).

Run the thought experiment in reverse-- what benefits would Australia get if it spent an extra half a trillion dollars a year and became the Worlds Greatest Fighting Force?

I know next to nothing about defense or foreign policy, so enlighten me-- besides bragging rights, what am I getting for that half a trillion dollars that I wouldn't get if we spent 20 billion dollars instead?

Vote! Or don't, see if I care...

I pretended to be a Democrat this morning and voted for Barack-- basically, for exactly the same reasons outlined by Megan McArdle. Bush-Clinton-Bush-Clinton just sounds downright un-American; we're not a Monarchy. Besides, Barack is inspiring and, it seems to me, if he screws up he's the least likely presidential candidate to screw things up in a really big way.

I would have voted for Ron Paul, but I decided to be reponsible instead. Ron Paul would be great, if only he wasn't such a nut. It's OK to be a nut if you know that your ideas are kinda nutty (reference: Penn Jillette); it's not OK if you take yourself too seriously.

Turns out I'm not so good at Magical Thinking

The Patriots lost; my career as a fortune teller is over.

If Hillary and John win big in the primaries tomorrow (I predicted that Barack and Mitt will be the nominees) then maybe all is not lost-- maybe I was just holding my crystal ball upside down when I made my 2008 predictions. We'll see...