prior probability

“But with that incredible growth came new problems.” –Ben Mezrich, The Accidental Billionaires, Ch. 22. Does Facebook face any real competition these days? ConnectU is dead. LinkedIn and Twitter are not even close (see this chart via AdWeek). Here are some startling statistics for your edification: the number of active Facebook users surpassed one billion in 2012, and there are now 1.49 billion active users on Facebook as of June 30, 2015. (Active users are those which have logged into Facebook during the last 30 days.) In short, Facebook is the most popular social network in the world by far. So, given the massive amounts of data Facebook collects from its users, should Facebook be treated as a “monopoly” in the legal sense, or should our antitrust regulators leave Facebook alone? What about Facebook’s acquisition of the popular instant-messaging service WhatsApp? Does this acquisition reduce or harm Internet competition in the short or long run?

That is our revised title of Richard Cohen’s recent essay in the Washington Post. Here is the gist of Mr Cohen’s argument in defense of tipping:

The waiter is my guy for the duration of the meal. He’s my agent. He looks out for me and, if he does a good job, I look out for him. He has an incentive to give me exceptional service, not some mediocre minimum, to ensure that my water glass is full, that my wine is replenished, to make sure that the busboy does not prematurely remove the plates — that I am not hurried along so that the owner can squeeze in another sitting. The waiter is my wingman.

But is the waiter the “agent” of the patron or of the restaurant owner? In any case, where do you come out on this social norm? Would you rather abolish this old-fashioned practice altogether (but pay more for your meal), or would you rather retain your tipping option? Also, is there a stable equilibrium, one way or the other, in the case of tipping? What would someone like F. A. Hayek or Leo Strauss say? (By the way, will future patrons at Danny Meyer’s fancy restaurants in NYC really stop leaving tips even after Mr Meyer phases out this practice?) Addendum: via Crooked Timber, our colleague Corey Robin has written up a thoughtful critique of Mr Cohen’s essay.

Here is our final project for our students this semester. Continue reading →

Check out the level of noise complaints for the Upper East Side. Either that part of town has a lot of noise or a lot of noise complainers. Hat tip: Ana Swanson (via Trulia).

We explore this novel legal question in our most recent work-in-progress titled “The Law & Economics of Research Fraud,” which is available on the Social Science Research Network (SSRN) here. Our paper sets the stage by reviewing three recent examples of alleged research fraud in the social sciences: James Hunton’s various research projects on accounting fraud, Michael LaCour’s fake gay-marriage survey published in the journal Science (and later retracted), and Alice Goffman’s dubious study of fugitive life in her best-selling book On the run. Next, we delve into the law and assess the potential civil liability of lead authors and co-authors in cases involving fabricated data under various common law theories of liability (tort and contract). We also assess the potential civil liability of research institutions and “predatory publishers” under various theories of vicarious liability. (By the way, we will write about the possibility of criminal liability in a future paper.) There is, however, a larger question that we leave to others for now: would the imposition of legal liability have a “chilling effect” on research? Maybe, maybe not, but here is another question to think about: why should academics be held to a lower legal standard than, say, businessmen are?

The “Nobel Prize” in economics–or the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2015–is perhaps the most prestigious award in all of the social sciences. Previous winners include our intellectual heroes Thomas Schelling, Ronald Coase, and John Nash. This year’s Nobel in economics was awarded to one Angus Deaton “for his analysis of consumption, poverty, and welfare.” Check out Professor Deaton’s beautiful autobiographical essay “Puzzles and paradoxes: a life in applied economics.” Here is an excerpt:

It has been a good time to spend a life in economics. Compared with many others, the profession is remarkably open to talent, and remarkably free of the nepotism and patronage that is common in professions in which jobs are scarce. It is also a profession that, deservedly on undeservedly, is very well- rewarded. The best gifts of a profession are the people it brings, to talk to, to work with, to be mentored by, and to make friends with. I have been truly fortunate in this respect. * * * Many of my oldest and best friends, many of them also mentors, have come to me through economics. Through economics too, I met my wife, Anne Case, and our personal and professional lives are almost entirely integrated; Anne is my critic, my colleague and coauthor, and my friend. * * *

Before Sean Parker discovered Facebook, he had co-founded a company called Napster, a peer-to-peer file-sharing website that allowed users to share MP3 music files with each other (see image below, courtesy of the website “How Stuff Works“). At the time, Napster was huge. According to Wikipedia, for example, “verified Napster use peaked with 26.4 million users worldwide in February 2001.” The Recording Industry Association of America wasted no time in filing a federal lawsuit against Napster–the file-sharing website was launched in June 1999; the lawsuit was brought in December 1999–and the record industry eventually persuaded a court to issue an injunction or court order shutting down the website … But did the court make the correct decision, and on what legal grounds did the court issue this draconian remedy (i.e. the injunction shutting down Napster)? Let’s say, by way of example, that you have paid for and downloaded onto your computer your favorite movie or your favorite record album. Is it illegal or unethical for you to then send that file to a friend … or to a member of your immediate family? What about your Netflix password? Is it illegal or unethical to share the password to your Netflix account with a friend or a family member?