Weirdly Rational Real Estate

If you're up for some brain-stretching exercise, listen to Robin Hanson talk with Russ Roberts about signalling.

Our old house in Madison
(Image from Google Maps Street View)

I think I'm missing a signalling gene or two, or maybe that's just my excuse for being a socially inept, introverted doofus. In any case, I sometimes reason myself into doing things... uh, differently.

For example, when we were moving from Madison, Wisconsin I used an unconventional method to find a realtor to sell our house. I sat down and decided what I really wanted was somebody who was really effective at selling houses-- somebody who would sell our house quickly for a lot of money. So I created a little questionnaire:

1. How many listings are you currently handling as the seller's agent?
2. How many buyers are you representing right now?
3. For the last five homes you sold:
   1. How long were they on the market?
   2. What was their appraised price?
   3. What was the sale price?

... and then I visited open houses and gave it to the real estate agents, asking them to fill it out and mail it back to me.

According to the agent who we eventually picked, this didn't go over so well with many of their colleagues. Many were actually offended! We are supposed to find a realtor that we like personally, through word-of-mouth recommendations; somebody with whom we feel like we can develop a good relationship, somebody who we feel like we can trust.

In the language of Robin Hanson, somebody who gives us the right signals.

Especially in the case of realtors, this seems odd to me. I'm hiring somebody (for many thousands of dollars) to help complete a financial transaction; I don't care if I like the person, I just want them to do a good job. Heck, we were moving out of town, so it's not like we were going to be lifelong buddies with our realtor!

I distributed a dozen or so questionnaires, but only received 2 or 3 back. We picked the person with the best track record, and they sold our house very quickly (we had two offers within two weeks) for above our asking price. Yes, this was back in 1998, in the good-old-days of rising real estate prices, and yes, maybe we would have had the same good results if we'd picked any other real estate agent at random. The mystery is: why are we so reluctant to look at objective measures of effectiveness when choosing our realtors, doctors and school teachers?

Higher Cost almost always = Lower Demand

So far, I've been a dismal failure as a psychic; my predictions are about as reliable as a used Yugo. But it's looking good for this prediction:

The increase in the minimum wage will mean fewer teenagers working during the summer of 2008.

The headline from this morning's New York Times is "Toughest Summer Job This Year is Finding One."

I'm surprised that neither of the economists quoted in the article mentions the increase in the minimum wage as a possible cause; one of them says that there's really no problem, that fewer teens WANT low-paying summer jobs these days. The other blames a general economic slowdown.

It's probably a combination of factors; I wonder if somebody smarter than me will come up with a clever way of teasing out the effect of the minimum wage increase separately from all the other things going on in our economy...

The Radiation Monster

I've just finished reading "Power to Save the World," which is all about why using uranium to generate power is a really good idea.

The author is a lefty environmentalist and writer who became convinced (after talking with a bunch of nuclear scientists) that nuclear power is cleaner, cheaper, and safer than any of the current alternatives. I think she's right.

Perhaps the most surprising factoid I learned reading the book is that there's no evidence that exposure to small amounts of radiation causes cancer. The evidence that does exist seems to indicate that it doesn't-- below a certain dose, it looks like radiation exposure doesn't hurt us at all.

That makes sense, and the paranoia about radiation fits in with the more general paranoia surrounding very small doses of toxic substances. Like the current paranoia about prescription drugs showing up in our water supply; people just can't seem to grasp the idea that our bodies have evolved the ability to heal themselves and are pretty good at dealing with all sorts of nasty stuff, as long as there's not too much of it.

All of the estimates of "future cancer deaths" from the radiation released from Chernobyl and Three Mile Island assume that, if 100% of people die from a radiation dose of 1000, then 0.1% of people will die if they're exposed to a dose of 1.

That makes about as much sense as saying "if 100% of people die when hit in the head by a 10 pound block of concrete dropped from a height of 15 feet, then 1% will die if hit in the head by a two-ounce rock dropped from a height of 15 feet." Dosage matters. Just ask the good folks at the Dihydrogen Monoxide Research Division.

Socialism Doesn't Work (a Rant)

I spent half a day at a ONE Massachusetts seminar a couple of weeks ago.

I knew I was going to have some, uh, issues with their philosophy when, within the first five minutes, they presented their Collective Value Proposition:

We want—and recognize that all Massachusetts residents deserve—healthy lives; healthy families; quality education; safe, vibrant communities; and broadly shared prosperity in a thriving state.

Yes! Absolutely! Agree 100%! GO TEAM!

These are goals we cannot achieve alone and can best accomplish by working together...

Yes!

...through a participatory, democratic government.

Ummm... really?

The same participatory, democratic government that decided it would be a good idea to invade Iraq?

That has failed to win the War on Poverty, the War on Drugs, and the War on Terror?

The government that's spending about twice what was projected on "universal" health coverage that (oops) isn't actually covering everybody in Massachusetts and might be making health care here even more expensive?

The government that a lot of people believe is unfairly influenced by corporations and the rich (like the $250,000 loan to Sal DiMasi that's been in the news recently)?

It's the system, stupid. Power corrupts. Incentives matter. If we want healthy lives, quality education, and safe, vibrant communities then give the Power to the People, Man. Don't give more Power to the Man!

I suppose the "participatory" modifier is supposed to address that. But the goal of ONE Massachusetts is not to fix a broken system-- it's to "change public attitudes towards government by promoting a positive vision of government." The phrase "lipstick on a pig" comes to mind.

I feel a little guilty being critical; they did feed me lunch, showed lots of useful information on the state budget, and went over some "framing" techniques I could use to make an audience more likely to agree with me.

Maybe we need more Witch Doctors?

The more I learn about medicine, the less I trust doctors.

Don't get me wrong, I'm not about to start advocating homeopathy or acupuncture or herbal therapy or any of the other "alternatives" to modern medicine. They're almost 0% trustworthy; I think I'd give doctors and conventional medicine a solid "B"-- I probably trust them 85% of the time. And I'm probably overconfident.

Robin Hanson posted some fascinating observations today about our trust in doctors at his Overcoming Bias blog, and suggests that we'd be better off if we had more faith healers.

Not healthier-- but better off. Because instead of spending lots of money on conventional medical treatments that don't work, we'd instead spend less money on unconventional medical treatments (that also don't work).

Health and longevity correlate very strongly with your level of wealth, not your level of health care. Maybe having an inexpensive Witch Doctor as your primary care physician for any non-life-threatening illnesses isn't such a bad idea...

(Photo credit: Felix42 contra la censura on Flickr)

Deaf Kids and California Rocks

Michele is in California, on a field trip teaching deaf high school kids about geology. They've got a blog, of course-- check it out here.

Nudge

I just read "Nudge: Improving Decisions About Health, Wealth, and Happiness." It nicely combines two subjects I've been very interested in recently-- behavioral economics and public policy.

The basic idea is to use knowledge of our built-in biases to nudge us towards doing the right thing. For example, if you ask people to put 3% of their salary into a retirement plan today, most people will say no. But if you ask them if they're willing commit to putting 3% in the next time they get a raise, most people will say yes.

We value money or things that we own right now more than things we don't.

Another example they use: install a light that shows people how much energy your house is using (green for not much, red for a lot), and people use a lot less energy.

We're not very good at turning long-term goals into short-term actions, unless we get short-term reminders. New York city's recent requirement that chain restaurants post calorie counts alongside items in their menus will be a very interesting test of this-- will the short-term reminder help people eat less and get skinnier?

I really like the approach of encouraging people to do the right thing with "nudges" instead of trying to force them with mandates. Now, if I could just figure out a way of nudging people to be less verbose in Town Meeting...