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Saturday, March 7, 2009
Friday, March 6, 2009
Dear Prof. Chomsky 2
This is a blog about nothing. Not about politics or the Arab-Israeli conflict. But since I posted already two posts about my conversation with Prof. Noam Chomsky, let me update you on that. After Prof. Chomsky replied in the last post, I replied the following:
I'll keep you -- literally -- posted...
Prof. Chomsky replied almost immediately:
Thank you Prof. Chomsky for taking some time to reply.
I already saw Mark Regev and he indeed said that. But do you think we can conclude by that the fact that Hamas, even though is the ruling power in Gaza, doesn’t have enough political strength to make other smaller groups stop their attacks on Israel?
In addition, could you please refer me to the sources in which you based your arguments regarding Iran and Hamas’ Ismael Haniyeh accepting a two-states proposal?
Thanks,
DB
I believe it would have been appropriate, and I hope you agree, for you to open your letter by acknowledging that your criticism was incorrect and my words were precisely accurate, as you now say you already knew. But put that aside, though you might want to think about it.To which I replied:
You are now raising an entirely different question. And the answer, as Regev will surely tell you (and Israeli intelligence if you proceed further), is that Hamas does not fully control other groups, like Islamic Jihad and other splinters. Israel, with incomparably more force at its command, and full control over the occupied territories extending vastly beyond what Hamas can hope to attain, was not able to stop terrorist attacks.
Note that we're discussing a footnote, about which my comments were precisely accurate. The text, which you're ignoring, is that Hamas lived up to the cease-fire fully and that total rocketing sharply declined, while Israel never for a moment lived up to the cease-fire -- as noted in my letter -- and went beyond on Nov. 4, under the cover of the US election, with a direct military violation, offering a pretext too absurd even to bother ridiculing, as Israeli commentators correctly observed.
On Haniyeh, one well-known example of his advocacy of the international consensus is http://www.washingtonpost.com/wp-dyn/content/article/2006/07/10/AR2006071001108.html, W Post July 12 2006. But if you just google you'll find others, including reports in the Israeli press. Of course, Israeli hasbara claims that Haniyeh didn't go far enough -- though we both know that that charge is pure cynicism, since he went far beyond what any Israeli leader has.
On Khamenei's endorsement of the Arab League position, see among others, http://www.khamenei.ir/EN/News/detail.jsp?id=20060604A. It's also well-known to Iran specialists, e.g., Ervand Abrahamian, in Barsamian ed., Targeting Iran. Again, Israeli hasbara will claim that he didn't go far enough -- just much farther than any Israeli leader.
All of this ignores the far more important facts that I reviewed briefly last night, and that I'm sure you already know. Immediately after the 67 war, Israel was informed by its highest legal advisers -- Meron and Shapira -- that any settlement in the occupied territories was a serious violation of the core of international humanitarian law, acknowledged by Moshe Dayan, who said it didn't matter. And you're I'm sure aware that for over 30 years, the US and Israel have virtually alone -- and by now completely alone -- barred the international consensus, while carrying very serious crimes in the occupied territories. If anything remotely similar were happening to Jews, I'm sure you would be the first to condone resistance, perhaps as violent as that of the Zionist resistance under the British. If so, and I presume it is so, you are hardly in a position to condemn the elected government of Palestine for not going far enough towards the international consensus (though of course much farther than Israel, the occupying power).
I think that should be clear.
Noam Chomsky
Dear Prof. Chomsky,
Thank you again for taking the time to reply to me. When I said I saw Mark Regev I meant that I watched after reading your mail, so it is not the case that I was aware of that particular interview before that. I apologize if you perceived that I was being rude to you. I am thankful to have this discussion and I appreciate that you are answering me.
I just read Haniyah’s article, and I must tell you that as far as I understand, the international consensus does not include the right of return to Palestinian refugees from 1948, because that, as you may know, is an indirect denial of the right of Israel to exist as a Jewish AND Democratic state, which is the Israel that the peace movements in both sides are aspiring. The right of return to Palestinian refugees into Israel is not consistent with a two state solution. That is a fact.
Unfortunately, the link to the Iranian source didn’t work. However, how would you reconcile Iran's 'support' for a two state solution with their call to wipe Israel off the map. I believe that, aside from the Iranian sources you are sending me, there is no official declaration of the Iranian government in any international well-known news station, agency or newspaper (such as BBC for example).
Let me just say something about your assumption about me condoning ‘Jewish resistance’. I am an Israeli, born in Venezuela to a second-generation Holocaust survivors and immigrated to Israel in 2004. I was a member of Hashomer Hatzair and Peace Now (Shalom Achshav) movement, and currently an elected member in the National Convention of the Meretz Party. I am currently doing Graduate school in Harvard University. To make it clear, I condemn any act of terrorism, either Muslim, Jewish or any other form of it. I condemn Jewish settlements in the occupied territories as well simply because I believe they are an obstacle to peace and are the core of the Israeli occupation. I do not praise Begin either for his terrorist acts in the pre-state era, but I do have some respect him for bravely putting together the Peace treaty with Egypt. Similarly I respect Fatah and the PLO for accepting a two state solution and renouncing to violence. But I also condemn Palestinian violent resistance from other groups. I think it is immoral to target civilians and the Palestinian resistance in my opinion is actually hurting the Palestinian cause more than helping.
We can go back in history and find thousands of quotes from Dayan, and even the more classic ‘socialist-zionists’ such as Ben-Gurion, Golda Meir and Rabin making statements against the Palestinians. I think those are unfortunate now, but I believe that they should be kept in that historic context and not use them to try to diminish all the efforts that the same and other Israeli leaders have done for Peace in the last decades. You know that anybody could come with thousand of quotes (and even actions beside words) of PLO and even AP members stating clearly anti-Israeli positions in violent languages before the Oslo Accords – and even after. However, I think that those kind of political attitudes do not contribute to constructive discussions. That is why Prof. Chomsky, I think that the event we shared – me as a humble viewer – and you as the main panelist, DID NOT contribute to find solutions for peace, but rather lacked of any academic spirit of discussion and learning and was purely propaganda (mainly when for every question the panel instead of answering they diminished publicly the student by calling them ‘illiterate’). The Israeli-Arab conflict is extremely complex. I wish it was as black and white as the panelist tried to present it. But if your narrative really wants to help bring peace, I would humbly suggest you to try engage also with mainstream Israelis, understand their fears and help them get past them. I felt that the talk did not help give Israelis, like me, the space to work for peace. Moreover, talks like this cause Israelis - even those on the left - to close ranks and retreat into a sort of intellectual ghetto.
Thank you again for reading my thoughts,
Respectfully,
DB
I'll keep you -- literally -- posted...
Wednesday, March 4, 2009
He replied!
Yes, Prof. Chomsky replied. But before I copy his answer (as promised) I would like to address one comment of a reader in the previous post. Rachel Fierstein commented the following in the "Dear Prof. Chomsky..." post:
Dear Rachel, thank you for writing. Maybe Prof. Dershowitz couldn't or did not want to come. I will write him an email with your quote just to clarify if he couldn't or did not want to. But in any case, Prof. Dershowitz is not the only person in a panel that can represent the Israeli position in the Boston Area. From an outsider's view (outsider to the organization of the event): it appears that if they did not find anyone to present the Israeli narrative is because they didn't put a big effort looking for one.
There were different interpretations and expositions, but not different perspectives on the narrative side of the conflict. There was nobody explaining the position of Israel. It is a fact. But if you read careful my post, this is not my critique. My critique is don't insult the public calling it a balanced or a "would have been balanced" if a speaker representing the Israeli position would have come.
In any case, Prof. Chomsky answered my email. As I promised, here is the answer. Of course, he claims, I am guilty for mishearing him:
My reply in the next post...
I attended the same event and just re-watched it. The moderator said the organizers attempted to make it more balanced, but these were the only speakers that responded. You miss quoted here. I know for a fact they contacted Dershowitz.
And just because none of them were pro-Israeli doesn't mean there weren't different perspectives. Perspectives don't only consist of "for" or "against." Perhaps that misunderstanding is why you felt fooled? The speakers did offer different perspectives. You should have paid more attention.
Dear Rachel, thank you for writing. Maybe Prof. Dershowitz couldn't or did not want to come. I will write him an email with your quote just to clarify if he couldn't or did not want to. But in any case, Prof. Dershowitz is not the only person in a panel that can represent the Israeli position in the Boston Area. From an outsider's view (outsider to the organization of the event): it appears that if they did not find anyone to present the Israeli narrative is because they didn't put a big effort looking for one.
There were different interpretations and expositions, but not different perspectives on the narrative side of the conflict. There was nobody explaining the position of Israel. It is a fact. But if you read careful my post, this is not my critique. My critique is don't insult the public calling it a balanced or a "would have been balanced" if a speaker representing the Israeli position would have come.
In any case, Prof. Chomsky answered my email. As I promised, here is the answer. Of course, he claims, I am guilty for mishearing him:
You misheard. I very carefully said that not a single rocket was fired by Hamas from the onset of the cease-fire until Nov. 4, when Israel invaded Gaza, breaking the cease-fire, which in fact it had never observed, maintaining the siege -- of course, an act of war, as Israel has long insisted.
Rocket firing dropped very sharply until Israel broke the truth. There were a few, but not by Hamas, as recognized by Mark Regev, Israeli government spokesman. Can send you the link if you like.
Noam Chomsky
My reply in the next post...
Dear Prof. Chomsky...
In the Microeconomics Summer School of the Hebrew University in June 2008, Prof. Kenneth Arrow - in his last address as the Summer School Director - gave to the participants (me among them) an advise for their academic life: If you find a result while doing research you should always think that you did something wrong along the way... check twice, three, four and even a million times. Relax the assumptions, give all possible values to all the variables. In short terms he told us: "Always question yourself, until there is no other questions to ask, before you can argue that you are right".
I think this is the spirit of a real and committed scholar in search of the truth.
I just came from a talk about the Gaza events in Boston University. Four out of the four panelist were presenting a very strong anti-Israeli view. Now, that doesn't bother me. Everybody is free to say and think pretty much whatever they want. As an Israeli I sometimes criticize the Israeli government. Thus, if other people want to do it (even all the time), go ahead, do it. It does not really bother me.
What really bothers me is when these kind of events open with the sentence: "This will be a very balanced panel, with different perspectives on the topic". The moderator even added "probably what the panelist will say here tonight won't please either the Israeli nor the Hamas Government"... but as my good friend M said: "I think Hamas would have been very happy to be in that talk!".
In any case, I believe that it is an insult to the public attending the event to say that a panel composed by four distinguished professors with clear strong opinions against Israel (Prof. Noam Chomsky, Prof. Duncan Kennedy, Prof. Stephen Walt and Prof. Irene Gendzier) is balanced. Just say that they will present one perspective of the conflict. But please, don't call it balanced trying to fool the public. It is irrespectful and even inmoral.
In any case, there are two issues about this event that I would like to share with you.
I met a very interesting Israeli Professor that in a very academic and professional manner came to the microphone to ask Prof. Chomsky. Prof. Paula Kabalo has been researching on Israel and Palestine in the period of the late 40s. She made very clear arguments - all of them based on quoted sources. For a humble student, like me, this could have been a very interesting situation: two scholars arguing - having a academic level discussion - on facts and not emotions. However, the response of the panel was almost as with everybody else that came to the microphone with a different view: "You have the problem of the illiterate, go and read some more". Of course they could not say that to Prof. Kabalo, but instead of engaging into a healthy discussion, they just diminished her using the advantage of siting in the stage as the panelist. It is a shame that the "you're an illiterate, go out and read" is the weapon of those who don't want to have a high level discussion. But even more shameful is that professors from the most prestigious universities in the world engage in that attitude like the ones I saw today.
A second thought. Prof. Noam Chomsky stated that "not a single rocket was fired from Gaza to Southern Israel from June to November 2008..." Please let me share with you the email I just sent to Prof. Chomsky:
I hope he will reply. Since I beleive in discussion Prof. Chomsky, your reply will be posted in my blog.
But if you are reading this, I am not trying to challenge your views. I am sure that I won't change them. I don't even intend to do so. But please, be as humble as Nobel Price Laureate Prof. Kenneth Arrow and follow his simple advise and before you make an statement, just make sure you are not missing any facts or don't distortionate them. And if you do, please be open to debate. You are a Professor as well.
I think this is the spirit of a real and committed scholar in search of the truth.
I just came from a talk about the Gaza events in Boston University. Four out of the four panelist were presenting a very strong anti-Israeli view. Now, that doesn't bother me. Everybody is free to say and think pretty much whatever they want. As an Israeli I sometimes criticize the Israeli government. Thus, if other people want to do it (even all the time), go ahead, do it. It does not really bother me.
What really bothers me is when these kind of events open with the sentence: "This will be a very balanced panel, with different perspectives on the topic". The moderator even added "probably what the panelist will say here tonight won't please either the Israeli nor the Hamas Government"... but as my good friend M said: "I think Hamas would have been very happy to be in that talk!".
In any case, I believe that it is an insult to the public attending the event to say that a panel composed by four distinguished professors with clear strong opinions against Israel (Prof. Noam Chomsky, Prof. Duncan Kennedy, Prof. Stephen Walt and Prof. Irene Gendzier) is balanced. Just say that they will present one perspective of the conflict. But please, don't call it balanced trying to fool the public. It is irrespectful and even inmoral.
In any case, there are two issues about this event that I would like to share with you.
I met a very interesting Israeli Professor that in a very academic and professional manner came to the microphone to ask Prof. Chomsky. Prof. Paula Kabalo has been researching on Israel and Palestine in the period of the late 40s. She made very clear arguments - all of them based on quoted sources. For a humble student, like me, this could have been a very interesting situation: two scholars arguing - having a academic level discussion - on facts and not emotions. However, the response of the panel was almost as with everybody else that came to the microphone with a different view: "You have the problem of the illiterate, go and read some more". Of course they could not say that to Prof. Kabalo, but instead of engaging into a healthy discussion, they just diminished her using the advantage of siting in the stage as the panelist. It is a shame that the "you're an illiterate, go out and read" is the weapon of those who don't want to have a high level discussion. But even more shameful is that professors from the most prestigious universities in the world engage in that attitude like the ones I saw today.
A second thought. Prof. Noam Chomsky stated that "not a single rocket was fired from Gaza to Southern Israel from June to November 2008..." Please let me share with you the email I just sent to Prof. Chomsky:
Dear Prof. Chomsky,
I carefully heard your arguments today at Boston University in the talk “Gaza: Beyond the Headlines”.
You stated that “not a single rocket” was fired from Gaza to Southern Israel between June and November 2008. I invite you to visit the following link in Google News with a search on rockets attacks from Gaza in that period. As you may see your argument (as well as many others I believe) were based in wrong historic facts. Could you please explain what did you mean by saying that “not a single rocket was fired”?
http://news.google.com/archivesearch?as_user_ldate=2008%2F06&as_user_hdate=2008%2F11&q=rockets+gaza&scoring=t&hl=en&ned=us&q=rockets+gaza&lnav=od&btnG=Go
Thanks,
DB
I hope he will reply. Since I beleive in discussion Prof. Chomsky, your reply will be posted in my blog.
But if you are reading this, I am not trying to challenge your views. I am sure that I won't change them. I don't even intend to do so. But please, be as humble as Nobel Price Laureate Prof. Kenneth Arrow and follow his simple advise and before you make an statement, just make sure you are not missing any facts or don't distortionate them. And if you do, please be open to debate. You are a Professor as well.
Monday, February 16, 2009
The cost of making new friends
Would Jerry be friends with Newman if they would find themselves alone in Alaska?
Have you noticed that when you are out of town for a long period you become friend more easily of people from the same origin as you? Maybe even people that you knew before but you never thought of being his/her friend, but now, you hang out pretty much all the time. Why is that?
Well, yes, as everything in this blog has costs associated to, making friends has costs as well. When you grow up in the same place having the same friends since high school you’ve become very close to them. You know each other pretty well. And you have many and good friends.
So, what if now you find yourself in a new city, with no known people around? Well, you’ll have to make new friends. Why? Good question. Maybe is part of your utility function, to have friends. Let’s use that as an assumption.
But, what is the problem? Well, you’ll have to invest time and effort in making good friends as those you left home. So, again, you encounter yourself with the problem of equating the marginal utility of the every minute invested in a new friend with the cost of your time. You will have to start going out for beer with some people you met at the office or the school, and then you will be start to trust them more and more so that they will gain the benefit of being your friend. The costs sometimes involves the time, the cultural barriers if you are in a totally different place or the cost of giving out information to your friends so that you will receive information about them.
But… there is a much simpler way. If you knew that there is another person or group of people your age that are from your home country in that city, it would be rational to try to contact them – even if you already know them and you were never friends with them before. Why? Well, there is no cultural barrier to cross, if you know them from before so you may have already some information about them, and as you, they are also looking for friends. So it means that the cost of “friending” with those people is less than with strangers in the street or in your new job.
Ok, let me try a graphical explanation (yeah right!). I would say that in this case your utility function is convex at the beginning and the concave after some inflection point in terms of time. Meaning that the first minutes or hours that you “invest” on an individual so that he/she will be your friend are not that productive (you won’t become best friends after one beer). However, the more you invest, the more “effective” is every minute until a point, maybe when you are already very good friends, that spending another minute won’t make you more than best friends with him/her.
So my argument is that the process of being very good friends with the people of similar background as you is much more faster, because you don’t start at the beginning of the curve, but at some more advanced point in which the marginal return of time is much higher. So in that sense, the costs of being friends with these people are lower.
People know this, and that is why in many framework in which they want you to become friends with others (to improve the productivity of the firm or to make you having a wonderful college/graduate school experience) they promote activities to lower the costs of making friends. They set up time to make you talk to each other, and to make you realize that you may have similar backgrounds. Or this is why companies do their “team events” every here and then. This is lowering the costs of knowing the people around you and becoming friends. This can explain many initiatives of getting people together in conflict zones such as Israelis and Palestinians children, students or adults. Lowering the costs of knowing each other will increase the chances of becoming friends and will induce higher productivity in the future.
So don’t be surprised if you see Jerry and Newman becoming new friends in a very remote place… well, maybe not.
Have you noticed that when you are out of town for a long period you become friend more easily of people from the same origin as you? Maybe even people that you knew before but you never thought of being his/her friend, but now, you hang out pretty much all the time. Why is that?
Well, yes, as everything in this blog has costs associated to, making friends has costs as well. When you grow up in the same place having the same friends since high school you’ve become very close to them. You know each other pretty well. And you have many and good friends.
So, what if now you find yourself in a new city, with no known people around? Well, you’ll have to make new friends. Why? Good question. Maybe is part of your utility function, to have friends. Let’s use that as an assumption.
But, what is the problem? Well, you’ll have to invest time and effort in making good friends as those you left home. So, again, you encounter yourself with the problem of equating the marginal utility of the every minute invested in a new friend with the cost of your time. You will have to start going out for beer with some people you met at the office or the school, and then you will be start to trust them more and more so that they will gain the benefit of being your friend. The costs sometimes involves the time, the cultural barriers if you are in a totally different place or the cost of giving out information to your friends so that you will receive information about them.
But… there is a much simpler way. If you knew that there is another person or group of people your age that are from your home country in that city, it would be rational to try to contact them – even if you already know them and you were never friends with them before. Why? Well, there is no cultural barrier to cross, if you know them from before so you may have already some information about them, and as you, they are also looking for friends. So it means that the cost of “friending” with those people is less than with strangers in the street or in your new job.
Ok, let me try a graphical explanation (yeah right!). I would say that in this case your utility function is convex at the beginning and the concave after some inflection point in terms of time. Meaning that the first minutes or hours that you “invest” on an individual so that he/she will be your friend are not that productive (you won’t become best friends after one beer). However, the more you invest, the more “effective” is every minute until a point, maybe when you are already very good friends, that spending another minute won’t make you more than best friends with him/her.
So my argument is that the process of being very good friends with the people of similar background as you is much more faster, because you don’t start at the beginning of the curve, but at some more advanced point in which the marginal return of time is much higher. So in that sense, the costs of being friends with these people are lower.
People know this, and that is why in many framework in which they want you to become friends with others (to improve the productivity of the firm or to make you having a wonderful college/graduate school experience) they promote activities to lower the costs of making friends. They set up time to make you talk to each other, and to make you realize that you may have similar backgrounds. Or this is why companies do their “team events” every here and then. This is lowering the costs of knowing the people around you and becoming friends. This can explain many initiatives of getting people together in conflict zones such as Israelis and Palestinians children, students or adults. Lowering the costs of knowing each other will increase the chances of becoming friends and will induce higher productivity in the future.
So don’t be surprised if you see Jerry and Newman becoming new friends in a very remote place… well, maybe not.
Saturday, January 3, 2009
Happy New Year!
Happy 2009 to all of you! Here's an insight about this new year:
As you may recall from TV or from where you were celebrating New Year's eve, people love to wear hats and even fake sunglasses. This is a source of profit for many industries, that every year can produce profit from making all these "New Year's Eve" toys and hats and T-shirts, etc.
There is certainly one industry for which this year was the last of long decades of profits: the new years eve sunglasses industry! Did you think about it? Since the 1980's there has been year after year people wearing these kind of sunglasses with the shape of the new year. This year, however, is the last one that it can be done for a good number of years. Maybe for 2010 the sunglasses can have both zeros, each in one eye, and having the 1 above the nose, but certainly after that, it is over!
Look for example at the website of one of the sellers of these kinds of glasses, and their "marketing statement":
So, I hope you had your sunglasses on while you were celebrating, because this will be one of the things that we will remember a few years from now...
Happy 2009!!!
As you may recall from TV or from where you were celebrating New Year's eve, people love to wear hats and even fake sunglasses. This is a source of profit for many industries, that every year can produce profit from making all these "New Year's Eve" toys and hats and T-shirts, etc.
There is certainly one industry for which this year was the last of long decades of profits: the new years eve sunglasses industry! Did you think about it? Since the 1980's there has been year after year people wearing these kind of sunglasses with the shape of the new year. This year, however, is the last one that it can be done for a good number of years. Maybe for 2010 the sunglasses can have both zeros, each in one eye, and having the 1 above the nose, but certainly after that, it is over!
Look for example at the website of one of the sellers of these kinds of glasses, and their "marketing statement":
Let's hope these industries will continue to go on and will survive despite the global recession and the new year..."The next time there will be two zeros in the center of the New Year's Sunglasses will be the year 3000. Do you think you'll be around then? If not, then pick these up FAST!"
So, I hope you had your sunglasses on while you were celebrating, because this will be one of the things that we will remember a few years from now...
Happy 2009!!!
Sunday, December 21, 2008
Secret Santa and Risk Aversion
Part of the Christmas Spirit is the Secret Santa game, or known as the “Secret Friend” in other places (such as Venezuela, where I grew up). I guess all of you know how it works, but just for those who don’t here is the main idea: a group of people decide to play the game, and randomly (or pseudo-randomly to be more correct) each individual receives a small piece of paper (or maybe an email if the recruiting is done virtually) with the name of another individual. Now, each person has to give at least one gift to the person that was assigned to him. The only thing that has to be taken care of by the organizers at the first stage is to make sure that no one received his own name.
This whole process is secret, meaning that if I received Juancito’s name in my little paper, then Juancito won’t know that I am his “Secret Santa” until I give him the final gift on a day that is agreed among all of the participants. There can be two ways to play this:
Now the big question is how much will you spend. As we have seen during all these posts, you as a rational consumer will think in the following way: you have to spend some money to buy a gift, and you are going to receive a gift back. Now, we assumed that there is a fixed utility from playing in the game (see previous paragraph), so now what is left is another computation: you will spend as much money in buying a gift for other person such that the utility that you will get from receiving the gift that they are going to buy you is equal or higher than what you could have bought for yourself with the money you are spending. That was long, let me rephrase it. Say that you know with certainty that you will receive a collection car that will raise your utility by 100 units (utility units have no meaning and it is just for the sake of the example). So, the money you will spend will be equal or less than what you need to consume something else that will raise your utility by 100 units or less. Meaning that if you decide to spend $20 dollars, it is because those $20 when you consume them in any other thing (restaurants, movies, etc) it will raise your utility by 100 units or less. Otherwise, you will spend less than $20 in your Secret Santa gift.
This formula becomes more complicated if you don’t know with certainty what the gift you will receive is - which is usually the case – because you don’t know who is buying it. So at this point, you will have to see the distribution across the members of your group, and only then your decision will be based in the expected value of the gift you are going to receive.
How can you know then what is the expected value? Well, if you know the persons you are playing with, then you can think about how wealthy or not they are or how much “givers” they are. If they usually invite you for a drink, or even for lunch once in a while, this means that the expected value of the gift you may receive goes up. If people are not like that, then you will lower the quantity you are willing to spend.
So this scenario involves risk. By buying a gift you are taking the risk that at the end your utility will remain at least at the level it was before entering the game. A very risk averse person will always buy cheap gifts (even below the expected value of the gift he may received), because he prefers to cover his back and not spend too much money since he might get the bad gift. A risk lover person will be happy to play Secret Santa. The interesting issue is that this games appears to be consistent with individuals that show Decreasing Absolute Risk Aversion (DARA) – the wealthier you are, the more you can run the risk of buying a more expensive gift without your utility being hurt so much (if you have a lot of money and you received a bad gift, you can go afterwards to the mall and buy anything else to compensate for that).
So, this situation appears to show a “market” with failures. As any other markets, there have been “regulations” trying to solve the incompleteness of the information:
Happy Holidays!
This whole process is secret, meaning that if I received Juancito’s name in my little paper, then Juancito won’t know that I am his “Secret Santa” until I give him the final gift on a day that is agreed among all of the participants. There can be two ways to play this:
- The game lasts for a couple of weeks, in which people are expected to give “small gifts” constantly, until the last day of the game in which people give the “final gift”, and at that moment they reveal themselves to the “receiver” as their Secret Santa.
- The first stage of the game with the “small gifts” can be skipped, and people only buy one “final gift” revealing their identities as well in that very same moment of handing out their gifts.
Now the big question is how much will you spend. As we have seen during all these posts, you as a rational consumer will think in the following way: you have to spend some money to buy a gift, and you are going to receive a gift back. Now, we assumed that there is a fixed utility from playing in the game (see previous paragraph), so now what is left is another computation: you will spend as much money in buying a gift for other person such that the utility that you will get from receiving the gift that they are going to buy you is equal or higher than what you could have bought for yourself with the money you are spending. That was long, let me rephrase it. Say that you know with certainty that you will receive a collection car that will raise your utility by 100 units (utility units have no meaning and it is just for the sake of the example). So, the money you will spend will be equal or less than what you need to consume something else that will raise your utility by 100 units or less. Meaning that if you decide to spend $20 dollars, it is because those $20 when you consume them in any other thing (restaurants, movies, etc) it will raise your utility by 100 units or less. Otherwise, you will spend less than $20 in your Secret Santa gift.
This formula becomes more complicated if you don’t know with certainty what the gift you will receive is - which is usually the case – because you don’t know who is buying it. So at this point, you will have to see the distribution across the members of your group, and only then your decision will be based in the expected value of the gift you are going to receive.
How can you know then what is the expected value? Well, if you know the persons you are playing with, then you can think about how wealthy or not they are or how much “givers” they are. If they usually invite you for a drink, or even for lunch once in a while, this means that the expected value of the gift you may receive goes up. If people are not like that, then you will lower the quantity you are willing to spend.
So this scenario involves risk. By buying a gift you are taking the risk that at the end your utility will remain at least at the level it was before entering the game. A very risk averse person will always buy cheap gifts (even below the expected value of the gift he may received), because he prefers to cover his back and not spend too much money since he might get the bad gift. A risk lover person will be happy to play Secret Santa. The interesting issue is that this games appears to be consistent with individuals that show Decreasing Absolute Risk Aversion (DARA) – the wealthier you are, the more you can run the risk of buying a more expensive gift without your utility being hurt so much (if you have a lot of money and you received a bad gift, you can go afterwards to the mall and buy anything else to compensate for that).
So, this situation appears to show a “market” with failures. As any other markets, there have been “regulations” trying to solve the incompleteness of the information:
- One possible regulation is the “small gifts” and “final gift” mode of the game. By making people give small gifts during a couple of weeks before you decide how much to spend in the final gift you may get more information about the expected value of the final gift. However, this system is problematic. Your expected value is being affected by the person who is giving you the small gifts. If, for instance, you are receiving crappy gifts (if any) and you decide to buy a bad final gift you may be punishing a person who gave good gifts along the way. This is not fair. Again, if the game is composed by risk averse individuals, all gifts will be bad.
- A second one is to establish a spending range or limit for the “final gift”. This is clearly an expected value. Is an average in terms of price of what is going to be the gift you are going to receive. Clearly, this helps a lot, but if it is not mandatory it still leaves some space to uncertainty.
Happy Holidays!
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