Charity Cheating (Perverse Incentives I)

Some incentives to give to charity
A notice to employees

“Sponsor a colleague and [we] will double match your donation – £2 for £1”; “Volunteer with a charity in your own time and [we] will ‘time-match‘ with a cash donation to the charity up to the value of £1, 200 p.a.”

I believe this employer has just created the right incentives for charities to pay their employees to donate to them! Not, I’m sure, that anyone would be interested in that.

Value

I am not an economist.

Just listened to The World This Weekend on R4. The presenter talked about bubbles, speaking particularly about gold, and said something along the lines of, “The price of gold is much higher than its value”.

If you think that an asset is overpriced, I assume you mean that future cash flows arising from the asset cannot generate an adequate return compared to its price. If you think goods for consumption are overpriced, I assume you mean that you would rather forego consumption at the asking price, and keep the cash instead.

Gold is, in a basic sense, almost useless. It’s a store of value, and not much else; hence it’s an asset that is not going to be consumed. The only way you can claim it’s overpriced, I think, is if you believe that the price is going to go down before you can sell. But right now, the flight from every other asset class is propping up the price. Isn’t that going to continue for the foreseeable future? Isn’t the value of gold precisely what you think you can sell it for, much more so than other kinds of asset?

Long term modelling

An article on the BBC site discusses the long term impact of the current financial crisis, if the economy keeps growing at 2.2% per year. In short, the the economy grows its way to far more wealth, and the current situation is just a small bump on the road.

But when you start by assuming 2.2% pa growth forever, what does it matter? Growth is what everyone agrees we need, and what everyone claims to be trying to create. Given that it seems to be the variable that people are trying to exert some control over, it seems odd to start by holding it constant. Perhaps the only really valid conclusion from this article is that growth really is a good thing – but I don’t think that was ever in doubt.

Territory

In the BBC’s report on Serbian protests over Kosovan independence, a girl by the name of Bojana Vuckovic is quoted as saying, “We don’t want to let it go because it’s ours, even if the majority of people there aren’t Serbian.” The ‘we’ of her statement is presumably Serbians. The majority of the people on the march would presumably agree to that statment or something similar.

What’s interesting is what ‘ours’ means in that sentence. I am no expert, but I guess that large parts of Kosovo are privately owned, and that neither the old Serbian nor the new Kosovan government would claim ownership of them. However, those governments would claim that their laws extend over that land. The ownership that Bojana is talking about is being in charge of, rather than having exclusive rights to.

So what I’m left thinking is that Bojana believes that, no matter who buys the land of Kosovo, Serbia must remain in charge. Even when Kosovo is 90% or more ethnic Albanian, Serbia must be in charge. I doubt that it’s cost-effective for Serbia to rule a land that doesn’t want to be ruled. So in the absence of an economic motive, why do some Serbs want so badly to be in charge of Kosovo?

Life Quickly Imitates Art, Even Sci-Fi

Charles Stross is now one of my two favourite currently publishing SF authors (the other is Iain M. Banks). I got a copy of his latest, Halting State, from Amazon a couple of days ago. I haven’t finished it yet, but so far it’s about economic sabotage in an MMORPG, set in 2016.

Like another modern Aristotle of SF, Neal Stephenson, Charles Stross seems to understand everything, including economics. More importantly, he understands why it’s important (something I only started to grasp a couple of years ago) and can explain it without killing the story. So Halting State spends some of its time discussing money supply and inflation within virtual worlds. So far ahead of the curve, so Charles Stross, I think.

Last night I picked up this week’s Economist, to find mention in the business headlines of Second Life‘s financial crisis. Halting State‘s characters refer to Second Life as a metaverse, not a MMORPG, but I still find this amazing. Theoretical GDPs and game-currency-to-hard-currency exchange rates have been published for a while now, but maybe the crossover from amusing sideline to area of serious interest is closer than even Charles Stross thinks.

Sex, Lies, and Money

I’ve never tried placing an advert on Facebook, but I’ve been told that FB offers excellent targetting. Apparently it’s possible to require that your ad only be shown to people who fit very narrow definitions, such as people who went to Imperial College and are under 25, or married women living in Cambridge.

Obviously, no amount of matching values from profiles will tell an advertiser exactly who will buy their stuff, but they will want to play the odds. It’s generally a waste of money to advertise a UK service to someone living in France, or to advertise books to someone who hasn’t filled in the “Favourite Books” field. On the other hand, travel, financial products and cosmetic surgery can be usefully adertised to both sexes, so you wouldn’t want to filter out some of that potential audience.

Now, if advertisers know their desired audience, and have tracked their previous successes and failures, they will have a good idea of which fields in my personal information are important and which are not. They probably have hard evidence to back this up.

The second and subsequent lines of my Facebook profile are:

Sex:

Male

Interested In:

Women

Relationship Status:

Single

These three bits of info are the truth and the whole (relevant) truth. Facebook advertisers seem to be very interested in them, judging by the ads that are normally shown to me – I guess about a third are dating-related.

So I was a little surprised, initially, to see an ad earlier for www.urbanconnections.co.uk, a gay dating/event site. Didn’t they see that I am “Interested In” women, and not men? A couple of seconds later I clicked that they probably don’t care what I put in “Interested In” – they presumably figure that there are enough men out there in the closet that it’s worth advertising to the apparently straight men as well as the openly gay. And they quite possibly have the statistics to back this up.

I wonder what else you could find out about society by examining Facebook advertising patterns, maybe using multiple fake accounts. Other people have been datamining it recently as well, although not using any advertising-related data. My hope with advertisers’ choices is that at least some of them would be gathering real evidence of what worked, rather than just guessing.