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Here is slight modification of the example Christoph presented in the last MEDS lunch (I don’t remember the attribution). I am going to describe three games, and, because for my main point I need to think of the game as taking place in the laboratory, I will call the game `an experiment’ and the players `subjects’, denoted S1 and S2. Below are full descriptions of three experiments. These descriptions are also given to the subjects.

Experiment 1: S2 leaves the room. S1 faces a disk divided into two sides and has to chose one side. His choice is recorded (say, marked on the back of the disk). Then the disk is randomly rotated. Then S2 returns and has to chose a side. If both subjects chose the same side, they get one dollar each. Otherwise, they are cast into the lake of fire.

Experiment 2: Same as Experiment 1, except that the disk is not rotated.

Experiment 3: The Experiment is called `Driving in Illinois’. The rest of the game is as in Experiment 2.

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The Economist magazine recently came out with its 2011 ranking of the World’s most `livable cities’. Not a single US city makes the top 10. Calgary in Canada is number five, Helsinki is number 6 etc. What is surprising is the approach adopted by the writers at the Economist. Identify a list of appealing attributes, rate the cities on each of them and then aggregate the ratings. Very Soviet. Why not ask people where they would rather live? I would be surprised if Calgary made it to the top ten. Now that I think about it, I wish the Economist would put nose to grindstone and do something really useful. Estimate the economic inefficiency caused by the fact that most people are forced to work in the countries of their birth. The magazine is keen on free trade in oranges and cotton, why not people? Open borders, full mobility. Hmmm, when next Mr. Obama meets the Indian PM, instead of complaining about outsourcing stealing American jobs, he should be pressing the Indian government to allow American’s to follow those jobs to India. In addition he should be railing against the impediments the government of India places on the outsourcing of higher education to the US. Why stop with India? Why not…………

Israel was not blessed by plenty of rain. 600-800 milimeters of rain per year in the center and north, 0-300 milimeters in the desert, which constitutes half of the country. As the population grows, and since the government does not build desalination facilities, we have less and less water. If things continue this way, the Israeli-Palestinian conflict will be solved in few years, with everyone dehydrated. But this is not my point.

Last year, instead of investing in desalination facilities, through TV ads, street ads and increased taxes on water consumption, the government called everyone to save money because the country dehydrates. The program was a success and people did save water.

Ad from last year

This year weather forecasters warned us in October that we face another dry winter, and so we should continue to save water. When my significant other told me about it, I replied that I do not believe in this forecast: the forecasters can check whether there are clouds over the Mediterranean sea, thereby forecasting whether we will have rain in three days. But forecasting weather a couple of months in advance seems to much for me. The winter may be dry but it may be wet as well. Luckily for me, winter turned out to be a standard one: we do have rains, not too much, not too little. About average.

Yesterday on my way back home, while rain was dripping, I saw a street ad saying “We face another dry winter”. And I thought, why do the ¬†save-our-water-ministry chose this line of advertising? The public is generally stupid, but eventually people will realize that the government always uses the no-water threat and they will learn to ignore these advertisements. So why use it when you do not know whether the year will be rainy or not? In a repeated game with incomplete information where the state of nature changes over time and the other player moves before you, if the other player uses a strategy that is good only for one state of nature, call this state¬†So, you eventually realize that either he does not know the state of nature, or he tries to make you think that the state of nature is So, even when it is not. In any case, you will play as if the other player does not know the state of nature.

But there are more fundamental questions that should bother me about the save-our-water ministry, like why don’t they build desalination facilities to supply the needs of our growing population. And building these facilities can attract votes. So why don’t they build them?

Diesel’s ads shout at us “Be Stupid”. You can see a guy with his face stuck in a young girls bottom with a line “You will eat better”; A guy sits on an elephant’s trunk with a line “Smart may have the answers. But stupid has all the interesting questions”; Or a cool guy with a line “Think less, stupid more”. I guess that I am too old for this type of humor. And I guess that there are many more young cool guys who find being stupid charming, than old professors who forgot how a smile looks like. One thought keeps on bothering me: is that how Rome looked like almost 2000 years ago, with people thinking it is cool to be stupid?

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