Rasmusen's Unpublished Papers (October 2018)
To see other abstracts, go to Abstracts of my published
articles. To return to my homepage, go to http://www.rasmusen.org/.
1. Working Papers
3. Useful Notes, Not for Publication
4. Topics I Am Working On Without Circulating
I have a separate page for papers that I
don't think I will ever publish.
Nothing at the moment.
"Back to Bargaining Basics."
Nash (1950) and Rubinstein (1982) give two different justifications for a 50-50 split of surplus to be the outcome of bargaining with two players. I offer a simple static theory that reaches a 50-50 split as the unique equilibrium of a game in which each player chooses a ``toughness level'' simultaneously, but greater toughness always generates a risk of breakdown. Introducing asymmetry, a player who is more risk averse gets a smaller share in equilibrium.
If breakdown is merely delay, then the players' discount rates affect their toughness and their shares, as in Rubinstein. The model is easily extended to three or more players, unlike earlier models, and requires minimal assumptions on the functions which determine (a) breakdown probability and (b) surplus share, as functions of toughness.
- "The Ted Hill Male Variability Paper that the Math Journals Suppressed."
Two mathematics journals first accepted and then unaccepted Ted Hill's paper on modelling the evolutionary advantage of male variability. This essay, posted as a blog entry, tells the story, with links, and discusses motivations and ethics.
"Getting around the State and Local Tax
Deduction Limit." The 2017 tax bill put a cap of
$10,000 on the deduction for state and
local taxes, while retaining existing rules for charitable donations.
Could states enact 100% state tax credits for donations to the state
treasury, so taxpayers could deduct as much as they wanted on their
tax returns. I argue that
these donations would and should be treated as quid pro quo items
tax credits for other donations.
- ``Voter Ideology: Regression Measurement of Position on
Left-Right Spectrum,'' (with J. Mark Ramseyer). For scholars who
measure of political preferences, a person's position on the
ideological spectrum provides a good start. Typically, scholars
identify that position through factor analysis on survey questions.
In effect, they assume that the calculated synthetic variable marks
the person's location on the liberal-conservative spectrum. They then
use that ideology variable either as the focus of a study on ideology,
or as a control variable in other regressions. The leading
attitudinal surveys--- the GSS, the CCES, and the ANES--- include
a variable giving a respondent's self-identified ideology. Factor
analysis assigns this variable no special prominence. To treat this
self-identification appropriately, we urge scholars to instead
measure ideology using the fitted value from a regression of self-
identified ideology on other survey responses. In contrast to factor
analysis, the regression approach assigns proper priority to self-
identification; it lets us test whether voters identify their own
ideology through identity-group variables; it avoids the bias
introduced in choosing the issue variables to include in the factor
analysis; and it identifies the issues that the average voter thinks
best define ``liberal'' and ``conservative.''
"Competitive Hold-Up: Monopoly Prices Too High
to Maximize Profits when Retailers or Complement Goods Are Perfectly
Competitive.'' If a monopolist
cannot commit to a wholesale price in advance, even competitive
retailers will be reluctant to enter the market, knowing that once
they have entered, the monopolist has incentive to choose a higher
price and reduce their quasi-rents. I call this inefficiently
price ``competitive hold-up''.
Competitive hold-up arises from upstream opportunism, not
downstream market power, and so is distinct from two problems that
look superficially similar, double marginalization and the two-
monopoly complements externality.
- "The Transfer Paradox in International Trade," with
The transfer paradox occurs when one country transfers wealth to
the result once prices reach their new equilibrium is that the giver
better off and the recipient worse off. We revisit this classic
distinguishing five different ways it can occur and offering intuition
numerical examples not available in the literature.
- Project: The State of New York ex. rel. Eric Rasmusen v.
Citigroup, Inc. I'm suing Citigroup for $2.4 billion because it
underpaid its New York State taxes, with IRS permission. The website
and FAQ's is at http://rasmusen.org/citigroup.
- Market Failure and Government Failure: The Regulation
of Business. I am writing an undergraduate
textbook on regulation. I start with 4 chapters of theory (supply-and-
failure, government failure, discounting and life valuation) and have
chapters of antitrust, with 6 more chapters on other topics. My aim is
to write a
relatively short book (350 pages) with lots of photos and stories,
topics and being interesting enough for someone to read for
recreation.I also want
to charge a low price, and I might well self-publish.
- "If You Support Free Trade, Why Not Free Immigration?"
Immigration increases the income of native capital more than it
reduces the income of native labor, as is often the case with free
trade in goods.
Immigration differs, however, in that if the aggregate
production function has diminishing returns to private capital and
labor this easily reverses the conclusion. This is likely because
capital— government and social capital— is unpriced, and
immigrant labor receives a portion of its benefit. Thus, whether the
total income of natives rises or falls with immigration, even aside
from consumption externalities and excess of spending over taxes,
remains an open
- "Understanding Shrinkage Estimators: From Zero to Oracle
to James-Stein." The standard estimator of the population mean is
the sample mean, which is unbiased. Constructing an estimator by
shrinking the sample mean results in a biased estimator, with an
expected value less than the population mean. On the other hand,
shrinkage always reduces the estimator's variance and can reduce its
mean squared error. This paper tries to explain how that works. I
start with estimating a single mean using the zero estimator and the
oracle estimator, and continue with the grand-mean estimator. Thus
prepared, it is easier to understand the James-Stein estimator, in its
simple form with known homogeneous variance and in extensions. The
James-Stein estimator combines the oracle estimate's coefficient
shrinking with the grand mean estimator's cancelling out of
overestimates and underestimates.
- ``Why Use Requirement Contracts?
The Tradeoff between Hold Up and Breach.''
A requirements contract is a form of exclusive dealing in which the
buyer promises to buy only from one seller if he buys at all. This
paper models a most common-sense motivation for such contracts: that
the buyer wants to ensure a reliable supply at a pre-arranged price
without any need for renegotiation or efficient breach. This requires
that the buyer be unsure of his future demand, that a seller invest
in capacity specific to the buyer, and that the transaction costs of
revising or enforcing contracts be high. Transaction costs are key,
because without them a better outcome can be obtained with a fixed-
quantity contract. The fixed-quantity contract, however, requires
breach and damages. If transaction costs make this too costly, an
option contract does better. A requirements contract has the
further advantage that it evens out the profits of the seller across
states of the world and thus allows for an average price closer to
- ``Isoperfect Price Discrimination: Bargaining and Market
Power,'' with David Myatt. Standard discussions of perfect
discrimination rest on a hidden
assumption: that the monopolist can make take-it-or-leave-it offers.
a monopoly charges different prices to each of a large number of
buyers, the correct paradigm is not the ultimatum game, but bilateral
monopoly. The monopolist's profit will not be the entire surplus, but
something less. Under ``balanced isoperfect price discrimination''--
constant .5 split of the bargaining surplus with each
buyer--- and constant marginal cost, the monopolist has the same
profit as monopoly pricing if the demand curve is linear, less if
is concave, and more if demand is convex. Increasing marginal cost
to make the monopolist prefer price discrimination. Isoperfect price
discrimination is complemented by an idiosyncratic product design and
informative advertising, whereas simple monopoly pricing is
facilitated by plain-vanilla designs promoted via pure hype.
pushes suppliers away from isoperfect price discrimination and towards
simple posted pricing.
- ``The Concealment Argument: Why No Conclusive Evidence
or Proof for
Will Be Found.''
Logic and Biblical evidence suggest that God wishes that some but not
all humans become convinced of His existence and desires. If so, this
suggests that attempts to either prove or disprove such things as
existence, past miracles, or present supernatural intervention are
doomed to failure, because God could and would take care to evade any
such efforts. In tex and pdf. (http://rasmusen.org/papers/conceal-rasmusen.pdf).
- "Fine Tuning, Hume’s Miracle Test, and Intelligent
Design" with Eric Hedin.
“Fine tuning” refers to the well-known puzzle that the values of
certain physical parameters need to take certain precise values for
life to exist, values tuned to within 1 in 1050. Some therefore
suggest that an intelligent designer must have created the universe. A
“miracle” is an event highly improbable according to our prior
beliefs. Hume’s miracle test says that if someone tells us a miracle
has occurred, we should balance the probability it truly did occur
against the probability he is lying. Fine-tuning is conceptually the
same as a miracle. Physicists propose a theory consistent with the
data, but it is consistent only if one or more parameters takes an
extremely low-probability value. Hume’s miracle test tells us we must
compare this with the probability the scientists are lying or
deceived. That is highly improbable, but as improbable as the
“miracle”? If not, our choice is not between intelligent design and
random coincidence, but between intelligent design and current
scientific theory. Without the feature of a designer, the supposed
fit to data of several standard scientific theories is less probable
than that the leaders in those subfields are lying or deceived.
Intelligent design makes a falsifiable prediction: that current
physics theory will continue to make correct predictions of reality,
of which fine-tuning will be a part. The alternative, scientist fraud
or error, implies that in time current scientific theory will prove
to be false and the coincidences will disappear. Thus, intelligent
design is the savior of physics, not its rival.
- Book Publishing Ideas: I've put these on a separate page,
Graphs and Tables." Tips for undergraduate writing (
- Niccolò Machiavelli: The Han Fei of Italy?
(with Dan Zhao)
The history of political thought pivots on Machiavelli’s 16th
His concentration on techniques of state survival and his audacious
of morality were revolutionary. Less well-known is the similar
and marginalizing by Han Fei in the China of the 3rd century B.C. Not
only were his
methods and conclusions similar, but just as Machiavelli was
condemned by the
Christian world even as his approach came to dominate it, so Han Fei
by the Confucian intelligentsia but
changed how Confucians thought.
Project: Mixed-Strategy Equilibria in Splitting a Pie,
with Christopher Connell. We characterize the mixed-strategy
equlibria in the classic bargaining game, "Splitting a Pie" and
derive for the first time the symmetric equilibrium of mixing over a
continuous interval of shares.
- Project: "Agape, the Golden Rule, the Rule of Law, and
Wealth Maximization: All the Same Idea?" Agape is better
translated as "esteem" than "love". Applied to public policy, it
implies equality under the law, not pity or social justice. Mercy is a
Christian private virtue, but not a public one.
- Project: "Do You Want a Smart Boss or a Stupid One?"
- Project:``Going from 2-by-2 to 1-by-1 in Basic Trade
- Project:``The Bagehot Rule Should Drop the Secure Collateral
- "Belief in God: A Game Theory Approach. "
- Project: "Technological Inefficiency of Monopolies: Hayekian
and Organizational Approaches"
- Notes on ``Biased Experts in a Sender-Receiver Model.''
- "Three Years or Six to Audit? The Ill-Considered Intermountain
Decision," The IRS wishes to interpret “omits from gross income” to mean
understates gross income” to extend the period for audit from three
years to six. It
took that position without notice-and-comment, in the context of the
hot pursuit of
a particular tax shelter, and after losing in court, with all 13 Tax
concurring, it made the motions of going through notice-and-comment so
as to get
Chevron deference on appeal. This paper discusses what should be
choosing a statute of limitations and points out how these
completely ignored in IRS decisionmaking. This provides a good example
how the various theories of Chevron deference work.
- ``What Asset Sale Price Is Fair? – The Chrysler Bankruptcy
Sale'' (with J. Mark Ramseyer).
- "A Simple Model of Keynesian Fiscal Policy." A one-input,
two-good, extremely simple structural model with rigid prices and
labor markets can
generate Keynesian effects.
URL: http://www.rasmusen.org/unpabs.htm. Indiana University, Department of Business
Public Policy, in the
Kelley School of Business, HH3080H, 1309 East Tenth Street, Bloomington, Indiana 47405-1701, (812)855-9219. Comments: Erasmuse@Indiana.edu.
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