Overcoming Bias

New Improved Lottery

People are still suggesting that the lottery is not a waste of hope, but a service which enables purchase of fantasy - "daydreaming about becoming a millionaire for much less money than daydreaming about hollywood stars in movies".  One commenter wrote:  "There is a big difference between zero chance of becoming wealthy, and epsilon. Buying a ticket allows your dream of riches to bridge that gap."

Actually, one of the points I was trying to make is that between zero chance of becoming wealthy, and epsilon chance, there is an order-of-epsilon difference.  If you doubt this, let epsilon equal one over googolplex.

Anyway:  If we pretend that the lottery sells epsilon hope, this suggests a design for a New Improved Lottery.  The New Improved Lottery pays out every five years on average, at a random time - determined, say, by the decay of a not-very-radioactive element.  You buy in once, for a single dollar, and get not just a few days of epsilon chance of becoming rich, but a few years of epsilon.  Not only that, your wealth could strike at any time!  At any minute, the phone could ring to inform you that you, yes, you are a millionaire!

Think of how much better this would be than an ordinary lottery drawing, which only takes place at defined times, a few times per week.  Let's say the boss comes in and demands you rework a proposal, or restock inventory, or something similarly annoying.  Instead of getting to work, you could turn to the phone and stare, hoping for that call - because there would be epsilon chance that, at that exact moment, you yes you would be awarded the Grand Prize!  And even if it doesn't happen this minute, why, there's no need to be disappointed - it might happen the next minute!

Superstimuli and the Collapse of Western Civilization

At least three people have died playing online games for days without rest.  People have lost their spouses, jobs, and children to World of Warcraft.  If people have the right to play video games - and it's hard to imagine a more fundamental right - then the market is going to respond by supplying the most engaging video games that can be sold, to the point that exceptionally engaged consumers are removed from the gene pool.

How does a consumer product become so involving that, after 57 hours of using the product, the consumer would rather use the product for one more hour than eat or sleep?  (I suppose one could argue that the consumer makes a rational decision that they'd rather play Starcraft for the next hour than live out the rest of their lives, but let's just not go there.  Please.)

Professors Progress Like Ads Advise

A system designed to advise a captive audience about the features and quality of available products would look a lot more like Consumer Reports than the world of advertising we see.  But this situation isn't especially puzzling - we understand that neither those who make ads nor those who watch them have product information as their primary goal.   Ad makers want to sell, and ad watchers want to be entertained.   

Observers often have trouble, however, understanding how academia could consistently fail to achieve useful intellectual progress.  Since academia is such a decentralized competitive system, people figure that any failures to make progress must be the unavoidable error that appears in any system designed to explore the unknown.  Since we can't know what we will discover until we discover it, complaints about progress are compared to second-guessing Monday-morning quarterbacks.   

But in fact, academia is no more about making useful intellectual progress than advertising is about informing consumers.  Professors seek prestigious careers, while funders and students seek prestige by association.  Academics talk and write primarily to signal their impressive mental abilities, such as their mastery of words, math, machines, or vast detail.  Yes, contributing to useful intellectual progress can sometimes appear impressive, but the correlation is weak, and it is often hard to see who really contributed how much.   Progress happens, but largely as a side effect.   

Calibrate Your Ad Response

Imagine you are about to watch a car ad.  You now have expectations about various aspects of the car, including its reliability, comfort, acceleration, cool factor, and so on.  These all combine into your total estimate of how much the car would be worth to you.  After you watch the ad, your expectations about many aspects may change.  You may think it more cool and reliable, but less comfortable and slower.  Sometimes you will think the car is worth more, and some times less, than you thought before.

If you expect that watching a car ad will tend to make you like that car more, raising your car value estimate, you are biased!  You should adjust your reaction tendencies until you expect no average change in your value estimate.  It can be reasonable to react positively to the fact that a car company choose to show you a car ad, but only if you react negatively when they choose not to show you an ad.

This is a very general result: you should expect any piece of information to make zero average change in any estimate of yours.  This applies to any aspect of any product, applies to any kind of ad or pitch, and any kind of signal or or clue you might get about anything.   

Why would car companies show ads to well-adjusted ad watchers?  Because even if ads do not change average estimates, they can increase estimate variation.  If most people's estimates are below the threshold for wanting to buy the car, then increasing estimate variation should increase the fraction of people who want the car enough to buy it.  If most people already think a product is good enough, however, its sellers should avoid showing variation-increasing ads to well-adjusted watchers. 

For a two-sided contest, such as a political race or legal trial, the tentative loser wants variation-increasing pitches, while the tentative winner avoids such things.  So, a side's relative silence can signal its confidence in being a tentative winner.

No Death of a Buyerman

Do ads bias beliefs?  Many think so, and want to regulate ads.  And yes, many ads don't seem to offer much useful info.   Here are four ad theories:

1. Exploiting bias - the small leaks of our ancestors' biases are now torn into gaping holes.
2. Burning money - a company willing to waste money on ads signals confidence in its product.
3. Identity - ads associate a product with a personal style, with which people want to identify.
4. Hidden info - if you look closely, you will see that ads do in fact have lots of useful info.

Here is important clue:  Every transaction has both a buyer and a seller.  Yet we hear much more about salesmen, and how to sell, than we do about buyermen and how to buy.  There are few thoughtful plays about "The Death of a Buyerman" or books on "How to be won as a friend and influenced by people."  Why?

Buyers are usually more uncertain about their value than sellers are about their cost.  So both sides tend to talk about buyer value.  Thus to the extent that individual ability is relevant, whether a sale happens is more clearly a signal of seller ability than of buyer ability.  This suggests a fifth ad theory:

5. Seller signaling - buyers and others like to see and affiliate with impressive sellers.

Just as we like to see and affiliate with sports stars, musicians, actors, writers, and professors, we like to see and affiliate with people who have impressive abilities associated with sales.  Watching ads or listening to a salesman's pitch may be like watching a sports star, and buying a salesman's product may be like getting a star's signature or t-shirt.   

Under this theory, we need no bias to want to watch ads that tell us little about a product, and then buy that product.  There might still be reasons to regulate such ads, but they would not be reasons of bias. 

Ads that Hurt

In some earlier posts I talked about the idea that advertisements can be privately profitable for firms but still be socially harmful due to uninternalized negative effects on their targets.  In the comments, Glen Raphael asked me for an example.  Here are a few of my favorites.

1. JIF peanut butter.  The slogan "choosy moms choose JIF" is famous in marketing circles for having been extremely effective.  The reason, of course, is that the implied corrolary to the slogan is "crappy negligent moms who don't care about their kids give other brands of peanut butter."  The harm here is that it gets moms into the habit of thinking that the place to concentrate their efforts to be better moms involve choice of peanut butter, instead of things that might actually work.

2. Disney.  One could write a whole book about how horrifying Disney is (I think maybe someone even has).  But my specific example is a commercial for Disneyland where the camera is in real tight on the face of an ecstatic awestruck looking kid.  After a few seconds, the parents chuckle knowingly and say something like "Timmy, this is just the entrance, let's go inside the park."  The idea is that Disneyland isn't just a fun place to eat junk food and go on roller coasters and stuff, it's a source of wonder; the very essence of childhood.  The harm here is obvious.

3. Any one of a million beer commercials.  Beer commercials overwhelmingly involve attractive women.  This is either because the advertisers want you to believe that drinking their beer will actually improve your chances with attractive women, or at least they want you to associate drinking their beer with being as attractive to them as you wish you were.  I think it's pretty clear that encouraging young men to think of women as ornaments that go nicely with getting loaded is not a recipe for subsequent success in matters of the heart, not for the men and certainly not for the women.

I could go on.

Advertisers vs. Teachers II

Bryan Caplan over at EconLog, in addition to giving this rookie a lovely welcome into the world of blogging, has raised a good point about the arguments that I made in my earlier post.  The state of play right now is as follows.  We start from the highly oversimplified premise that kids are either going to be influenced by commercial advertisers or by public school teachers.  Our positions are:

Me: To a first approximation, the harm done by unregulated advertisers is fixed at the level that arises from profit-maximizing advertising practices; any advertiser who refrains on principle from a bit of profitable but socially harmful advertising will be replaced by someone who has no such qualms.  In contrast, the amount of harm that teachers will do depends much more on the characteristics of the people who select into the teaching profession, as well as on the professional ethos in which they are trained and supported.  This raises the possibility that people with a natural affection for kids will be the ones doing the teaching, supported by an institutional infrastructure and set of professional norms that are themselves set by pro-kid people.

Bryan: The very same things that make it possible that teachers will be better for kids than are commercial advertisers also makes it possible that they will be worse.  They might end up being ideologues who are committed to passing along dangerous nonsense or ex-jock gym teachers who have nothing but contempt for the unathletic (in fairness to gym teachers, I think there has been some progress on this front in recent years) or just jerks who like to make themselves feel big by pushing little kids around.

Bryan's is a very powerful objection.  The more-or-less fixed level of damage done by commercial advertising is not the worst possible outcome.  A world dominated by vapid consumerism is a lot worse than the Enlightenment utopia I dream about, but it is a lot better than some other things.  So one might argue against public education on insurance grounds: there is always some chance that the really bad guys will get to be in charge of' public education, and to insure against that we need to keep power out of the hands of teachers.  But I don't think that's Bryan's claim.  I think he is saying some combination of (i) the damage done by commercial advertisers is not that bad; and (ii) the influences of public education are really bad as things stand right now.  And this seems wrong to me.

I also enjoyed that lunch at GMU.  We hadn't know each other five minutes before we were all hollering at each other.  What's not to like?

Advertisers vs. Teachers

Suppose that commercial advertising increases your demand for advertised products, but at the same time makes you worse off by reducing your ability to appreciate those things that commercial advertisers don't sell.  Since the harm that you suffer doesn't affect the advertisers' profits, they have no incentive to take it into account when choosing their level of advertising.  This is a market failure in the same sense as better known ones like pollution; the fact that the people choosing the level of the activity don't bear the full costs causes there to be "too much" of it.  This alone strikes me as sufficient reason for a pretty pronounced hostility to persuasive commercial advertising (there are other reasons too), particularly when children are involved, since children are more likely to suffer the ill effects.

But taking this position raises a question.  Children are going to get their ideas from somewhere, so arguing that there should be less advertising persuasion is pretty much tantamount to saying that there should be more of some other kind of persuasion.  Let's say for argument's sake that the competitor for the attention of children is their (mostly public school) teachers.  Let's also stipulate that it is not hard to come up with stories in which teachers won't do what's best for kids either.  Maybe they want to teach obediance and so make their own jobs easier, or maybe they want to turn the kids into little clones of themselves, and so on.  But I mostly like teachers, for all their flaws, and mostly think that increasing their influence on kids would be a good thing.  Is there any sound basis for this?  Or is it just bias on my part stemming from the fact that I was raised to respect the kinds of things that teachers are about?

I will offer three defenses for my anti-advertiser, pro-teacher position.  First, teachers' opportunities to make themselves better off at the expense of children, while not negligible, are for sure much smaller than those of commercial advertisers.  Second, the kinds of people who select into teaching tend to be people who like kids (why else spend all day with them?) and so are naturally inclined to seek their well-being.  Third, teachers are part of a profession that inculcates and supports the adoption of the identity of "teacher," providing a social and emotional infrastructure that makes it easier to perform the (pro-kid) behaviors that the identity prescribes, even when you don't feel like it.

I didn't convince Robin.  Did I convince you?  First blog post ever!