Rasmusen's Unpublished Papers (December 4, 2015)
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 Useful Notes, Not for Publication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.
- "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. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2675681.
- 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.
- ``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 marginal cost. http://www.rasmusen.org/papers/requirements-rasmusen.pdf.
- The Economics of Regulation: Coercion for the Public Good. I am writing an undergraduate
textbook on regulation. I start with 4 chapters of theory (supply-and-demand, market
failure, government failure, discounting and life valuation) and have just 2
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, skipping many
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. http://www.rasmusen.org/g406/chapters/
- ``How Immigration Can Hurt a Country.''
Can immigration (or capital inflow) hurt the welfare of a country? Yes, if there are decreasing returns to the factor, as this little paper will explain. The idea is important, and probably is new--- at least, I couldn't find it by a google search--- but an economics journal would say it is obvious, I think, so I probably will not try to publish it in a journal. I will post it on the web instead. I do hope it gets into the academic literature and the policy debates. If it is received favorably, I will tidy it up and put it into journal style, adding cites and superfluous generality, and checking my arithmetic.
- ``Coarse Grades,'' with Rick Harbaugh.
Certifiers of quality often report only coarse grades to the public
despite having measured quality more
finely, e.g., "A" instead of "98". Why? We show that using coarse grades can
actually result in more information
reaching the public, because it encourages low-quality individuals or firms to
become certified. In our model the
certifier aims to minimize public uncertainty over quality subject to the
feasibility constraint of voluntary
certification at a fixed cost. Moving from the best exact grading scheme to the
best coarse one (a) induces more
participation and (b) reduces public uncertainty.
``Concavifying the Quasi-Concave,'' with Christopher Connell.
We show that if and only if a real valued function f is strictly
quasi-concave except possibly for a flat interval at its maximum and belongs
to a precise regularity class, there exists a strictly monotonically increasing
function g such that g of f is concave.
We prove this sharp sharp characterization of quasi-concavity for any
Euclidean space or even any arbitrary geodesic metric space. We also establish
a simpler sufficient condition suitable for most applications for
concavifiability on Euclidean spaces or any other Riemannian manifolds.
http://rasmusen.org/papers/quasi-connell-rasmusen.pdf (sprawling version with intuition and extra results) and
http://rasmusen.org/papers/quasi-short-connell-rasmusen.pdf (concise, math, version).
- ``Isoperfect Price Discrimination: Bargaining and Market
Power,'' with David Myatt. Standard discussions of perfect price
discrimination rest on a hidden
assumption: that the monopolist can make take-it-or-leave-it offers. If
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''-- a
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 demand
is concave, and more if demand is convex. Increasing marginal cost tends
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. Competition
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 God's
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, at
- ``Law, Coercion, and Expression: A Review Essay on Frederick Schauer's The Force of Law and Richard McAdams's The Expressive Powers of Law.'' Forthcoming, Journal of Economic Literature. What is law and why do people obey it? This question from jurisprudence has recently been tackled using the tools of economics. The field of law-and-economics has for many years studied how fines and imprisonment affect behavior. Nobody believes, however, that all compliance is motivated by penalties and it is questionable whether that is even the typical motivation. Two books published in 2015, Frederick Schauer's The Force of Law and Richard McAdams's The Expressive Powers of Law, consider alternative motivations, Schauer skeptically and McAdams more sympathetically. While coercion, either directly or in its support of internalized norms, seems to dominate law qua law (and not as a mere expression of morality), a considerable portion of law serves other uses such as coordination, information provision, expression, and reduction of transaction costs.
- ``Leveraging of Reputation through Umbrella Branding: The Implications for Market Structure.''
Forthcoming, Journal Economics and Management Strategy. A firm with a reputation for high quality in
one product may usefully extend that reputation to other products. We
look at how that works in a moral hazard model of product quality.
- "Principles of
Graphs and Tables." Tips for undergraduate writing (
- 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: "What Does It Mean To Be a Liberal? An Objective Approach.'' How does one define what it means to be a liberal or a conservative? People disagree. I suggest that it is useful to find an objective measure of liberalism based on what the average person in the population thinks it means to be liberal. I do this by regressing a person's self-reported degree of conservatism on his personal characteristics and his answers to specific political questions. using data from the General Social Survey. This method also allows one to test whether people think of liberalism as a characteristic of social identity (e.g., ``I'm an unmarried black female, so I must be liberal'') or of political belief (e.g., ``I'm pro-abortion, so I must be a liberal''). I argue that the best way to do these regressions is by openly mining the data in a way as transparent as possible, ignoring the concept of statistical significance.
- Project:``Odd, Enter; Even, Out: A Peculiarity of Buyout, Blackmail, Extortion, and
Nuisance Suit Games.''
- Project:``Going from 2-by-2 to 1-by-1 in Basic Trade Theory.''
- Project:``The Bagehot Rule Should Drop the Secure Collateral Proviso.''
- "Belief in God: A Game Theory Approach. "
- Project: "Technological Inefficiency of Monopolies: Hayekian and Organizational Approaches"
- Project: "Stigma in a Moral Hazard Model."
- Notes on ``Biased Experts in a Sender-Receiver Model.'' http://www.rasmusen.org/papers/bias-rasmusen.tex.
- "Three Years or Six to Audit? The Ill-Considered Intermountain Decision," The IRS wishes to interpret “omits from gross income” to mean “reports but
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 Court judges
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 considered in
choosing a statute of limitations and points out how these considerations were
completely ignored in IRS decisionmaking. This provides a good example for showing
how the various theories of Chevron deference work.
- "Hold-Up as a Social Cost of Monopoly with Perfectly Competitive Retailers
or with Consumers."
- ``What Asset Sale Price Is Fair? – The Chrysler Bankruptcy Section 363
Sale'' (with J. Mark Ramseyer).
- "A Simple Model of Keynesian Fiscal Policy." A one-input, one-period,
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, BU 456, 1309 East Tenth Street, Bloomington, Indiana 47405-1701, (812)855-9219. Comments: Erasmuse@Indiana.edu.
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