…Taxi Driver, claims Robert Mundell. John Authers has the scoop:

John Hinckley, the deranged would-be assassin who attempted to kill Ronald Reagan in 1981, claimed that he was inspired by [Taxi Driver]… According to Mundell, the wave of sympathy for President Reagan that was engendered by the assassination attempt deterred Democrats in Congress from voting against his proposed tax cuts. Due to this accident of history, the US administered a big fiscal stimulus at the same time that Paul Volcker at the Federal Reserve was administering tight money. This, for Professor Mundell, was vital in creating the era of prosperity that followed.
“Taxi Driver is the most important movie ever made from the standpoint of creating GDP,” Mundell told delegates. “It’s the movie that made the Reagan revolution possible. That movie was indirectly responsible for adding between $5 trillion and $15 trillion of output to the US economy.”

John’s despatches from Vancouver are well worth reading, by the way.

Those in shouting distance of London may be interested in this:

‘Why Economics Matters’: The New Palgrave Public Lecture 2008

Chair: Evan Davis
Speakers: Tim Harford, Martin Wolf, Professor Klaus Nielsen and Professor Franscesco Caselli

Date: Tuesday 20 May 2008
Time: 6.30-8pm
Venue: Old Theatre, Old Building, London School of Economics and Political Science

My experience suggests that the place will be full long before the start time - do turn up early. The New Palgrave dictionary of economics website is here.

Clay Shirky reports on a conversation with a TV producer, after describing a flurry of activity on the Pluto page:

She heard this story and she shook her head and said, “Where do people find the time?” That was her question. And I just kind of snapped. And I said, “No one who works in TV gets to ask that question. You know where the time comes from. It comes from the cognitive surplus you’ve been masking for 50 years.”

So how big is that surplus? So if you take Wikipedia as a kind of unit, all of Wikipedia, the whole project–every page, every edit, every talk page, every line of code, in every language that Wikipedia exists in–that represents something like the cumulation of 100 million hours of human thought. I worked this out with Martin Wattenberg at IBM; it’s a back-of-the-envelope calculation, but it’s the right order of magnitude, about 100 million hours of thought.

100 million hours sounds like a big number, but as Clay goes on to describe, it’s tiny. 100 million hours is about 20 minutes per US citizen - roughly the amount of time collectively spent watching advertisements in a typical weekend. (That’s Clay’s number: I’d have guess it only took an evening for each American to watch 20 minutes of adverts, but I am clearly a TV-pessimist and out of touch.) HT: Virtual economics.

Update: My TV pessimism was correct - see Comment No 2 from Gerald, below. Thanks, Gerald!

That was one of one of the messages I tried to put over to audiences of the top US radio show, “Morning Edition”. Apparently you can listen to it here.

This morning I am in Amsterdam, promoting the Dutch version of “The Logic of Life“. The most disturbing thing about this is that my publishers are claiming that I am “the Jeremy Clarkson of economics”. I don’t know what’s worse: being compared to Clarkson or the knowledge that he’s a star in the Netherlands.

Nevertheless, nice to be here. Sadly I will not get time to visit the Aalsmeer Flower Auction, written up brilliantly in John McMillan’s “Reinventing the Bazaar“, one of my favourite economics books.

The FT has a report on Global Brands today; meanwhile, the NBER tells me about this research from economist Gary Richardson:

In medieval Europe, manufacturers sold durable goods to anonymous consumers in distant markets, this essay argues, by making products with conspicuous characteristics.  Examples of these unique, observable traits included cloth of distinctive colors, fabric with
unmistakable weaves, and pewter that resonated at a particular pitch.
 These attributes identified merchandise because consumers could observe them readily, but counterfeiters could copy them only at great cost, if at all.  Conspicuous characteristics fulfilled many of the functions that patents, trademarks, and brand names do today.
The words that referred to products with conspicuous characteristics served as brand names in the Middle Ages.  Data drawn from an array of industries corroborates this conjecture.  The abundance of evidence suggests that conspicuous characteristics played a key role in the expansion of manufacturing before the Industrial Revolution.

I read too many American blogs. They use words such as “smackdown”. Anyway, the debate between me and Dan “Predictably Irrational” Ariely continues - the collected posts are being gathered here.

In my reply to Dan’s first post, I finish by challenging him:

The weaknesses of laboratory experiments are not always quite so evident, especially when they are described as compellingly as in Predictably Irrational. So, let me point them out. While laboratory experiments are great for creating controlled conditions, they also create artificial conditions. There are several examples of important clashes between what happens in the laboratory and what happens outside. We know, for example, that procurement managers systematically screw up when bidding in a laboratory auction, but they do much better job in the (apparently identical) real life auctions situations they face everyday.
The economist John List has tried to replicate some famous “predictably irrational” results from the laboratory; the results tend to evaporate in more realistic settings. In one example I describe in The Logic of Life, List shows that the “irrational” result (which is that people given an unexpected raise work much harder than they could get away with) only lasts for ninety minutes. A gratitude effect that lasts ninety minutes is not the basis on which to rewrite your company’s human resources policy.
I’m not aware that any of Dan’s experiments have been challenged in this way, and I was pleased to see that he often tried to carry out his work in realistic settings such as restaurants and bars. So this isn’t an attack on his work–it’s more of a question. Dan, how can we be confident that these experimental results hold up in real life? And what further work would you like to see, to make us more confident in them?

Dan’s reply will be excellent, I am sure, and is due on Monday.

Alex wrote to me in my Dear Economist guise:

Dear Economist,
When invited to dinner, I am often unsure whether to bring good wine. If I take an expensive bottle, it may go unappreciated – either through lack of appreciation or people not seeing what I’ve brought. Taking plonk means I can get a free ride on others’ largesse, but my tightfistedness could get rumbled – what do you recommend?
Alex, Geneva

My reply is here, but the FT’s Chief Economics Commentator, Martin Wolf, offers his own view:

Adults should never bring wine as a gift in the expectation that it will be served that evening. If your hosts have any discrimination, they will already have chosen suitable wine. The implication that they cannot do so is insulting. If it is bad wine, they will be doubly insulted. If your hosts have no discrimination, why are you visiting them?

The right thing to do is write a thank-you note after you return home. If you enjoyed the evening, send flowers or some other present, perhaps even a good bottle of wine.

That all sounds very sensible to me, but I’d still like to see Martin’s intuition properly mathematically modelled. Meanwhile Dan Ariely’s first “Dear Irrational” is now up.

A consulting firm specialising in the use of game theory to guide strategic decisions directs me to the following piece of corporate public relations - advice to Barack Obama based on a game theoretic analysis:

Act firmly – To avoid DNC pressure, it is crucial that Obama shows no weakness in his resolve to stay in the nomination race. Show dignity – Even if Sen. Clinton increases her negative messaging, Obama should not respond directly but emphasize his message of unity and hope.

Seek alliances – The analysis revealed that Edwards is an uncommitted player who urgently wants to make a decision. Either candidate could potentially secure his endorsement by aligning with some of his key issues.

Support spiritual values – The game-theoretical tools also exposed how Obama could profit from McCain’s strained relationship with the Evangelical voters; in particular, if Obama embraces some of the Evangelical values, he can lead McCain to abandon his pursuit of key Democratic issues and even influence McCain’s choice of running mate.

This sounds plausible enough, and I am something of a game theory fan. Still, I have some concerns:

Even though the game-theoretical tools make calculations that are inaccessible to the human mind – in this case analyzing 8,388,608 outcomes – the results are made transparent.

That sounds nice. But is it? If the calculations are inaccessible to the human mind, what confidence can we have that the players will follow equilibrium strategies? Still, it sounds fun and not entirely ridiculous. Much much more from me on game theory’s role in the real world in chapter two of The Logic of Life. Chris Ferguson and Tom Schelling are the heroes of the tale, John von Neumann the compelling anti-hero.

What should top record labels, software giants and other media companies do about digital piracy? There are two obvious options: get tough and defend intellectual property rights with every legal and technological trick in the book, or tolerate some illegal copying in the hope of generating buzz and making money in some other way.

This is a debate that generates strong opinions, and where you stand seems to depend on whether you’re an industry accountant or a new economy guru. (Chris Anderson, editor-in-chief, Wired magazine, coined the phrase “Freeconomics” to describe giving cheap things away for free in order to create buzz.)

But look closer and you realise that the corporate suits aren’t all adopting the same strategy. The music industry doesn’t seem able to make up its mind: first it turned a blind eye to traditional mix-tape piracy, then it cracked down on illegal file-sharing while raising the price of CDs, and finally it slashed the price of CDs in an attempt to compete head-on with downloads, legal and illegal.

The remainder of this column can be read here. Please post comments below.