Ed Castronova writes to inform me that:

With generous support from the MacArthur Foundation, we have created a fun game environment and used it to conduct a month-long experiment. Our experimental question (kept secret up to now) was: Are fantasy game players economically “normal”? Or on the contrary, when they make themselves into elves and dwarves and hobbits, do they stop taking economic decisions seriously? We created two virtual worlds, one an exact copy of the other, except that in the experimental world the price of a simple healing potion was twice as high as in the control. If people are taking prices seriously in this fantasy environment, they should buy fewer of the potions when potions are more expensive.

At stake here is the entire idea of using virtual worlds as a Petri dish. If fantasy gamers behave in ways that violate our most basic assumptions of economic normalcy, then it makes no sense to use virtual worlds to study large-scale economic behavior. If, conversely, fantasy gamers seem to be normal economic agents, then perhaps some of the behavior in virtual worlds does indeed generalize to the real world. If so, then we can consider using virtual worlds to conduct controlled experiments at the macro scale of society, where our most pressing problems seem to live (natural resource management, intercultural mistrust, information security, disease).

The initial findings of the Arden experiment will be released during the International Communications Association meetings in Montreal next weekend. The session we’re part of is this one:

“High Density Session: The Web 1.0, 2.0, and Beyond”
Time: Sat May 24, 3:00 - 4:15pm
Place: Le Centre Sheraton / Drummond West

See the entire schedule for Saturday here:
http://convention3.allacademic.com/one/ica/ica08/index.php?click_key=3&cmd=Multi+Search+View+Program+Load+Scheduled+Times&schedule_day=2008-05-24+00%3A00%3A00&PHPSESSID=e76b3aa3a0d5c7b574ab10b60c31733e

I would be mightily surprised if the answer is not “yes”, but let’s see. And the question strikes me as foundational. More on Castronova here and here and especially (in this context) here. More information when I know it.

New Economist seems to be having a migration special, its impact on rural China, migration and innovation, and why people emigrate.

Tim Leunig and Nick Crafts report:

‘Had well-intentioned planners implemented green belts in 1800, then Britain would not have been able to gain the “agglomeration economies” that so benefited the Victorian economy: we would not have become the workshop of the world.’
‘So too today: high-skill cities such as Oxford and Cambridge have the potential to be a centre of high-wage agglomeration cities, just like Liverpool and Manchester a century ago. But unlike Liverpool and Manchester a century ago, their growth is constrained by highly restrictive planning laws.’

That is the press release (.doc), which has a couple of pages of detail. The paper does not seem to be available online yet.

Dan Ariely responds to my comments, this time on video; I won’t even try to pre-empt what he says or how he says it - but don’t miss it.

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.

The Centre for Economic Policy Research reports that:

Soap operas (novelas) are watched by the vast majority of the population in Brazil, and often portray families that are much smaller that the reality for the country. The authors of CEPR DP6785 use this to examine the effects of television, and of role models portrayed in these novelas, on individual behaviour, specifically fertility choices.

Rede Globo has a virtual monopoly on the production of novelas, and an analysis of differences in the timings of Globo’s entry into areas of the country, coupled with census data, reveals that areas reached by the Globo signal had significantly lower fertility than comparable areas not reached by Globo. The magnitude of the effect is about one tenth of the effect of being married on fertility, and is comparable to that associated with an increase of 1 doctor or nurse per 1,000 people.

The authors find that the effect is strongest for women of lower socioeconomic status, and (a) is insignificant for women aged 15-24; (b) leads to an 8% decrease in the mean probability of giving birth for women aged 25-34; and (c) leads to an 11% decrease in the mean probability for women aged 35-44.

Further evidence from naming patterns and the impact of the introduction of foreign soap operas that are not seen as realistic portraits of Brazilian life indicates that it is novelas, not just televisions per se, that are behind the results.

Question - is this good news or bad news? Steve Landsburg would say bad news.

At the Royal Economic Society conference a couple of weeks back, I sat in on an interesting overview of the Mirrlees Review of taxation in the UK. Time constraints - and fire alarms - stood in the way of a detail discussion, but lots of early position papers are up here, and I am told that the latest drafts are to follow very shortly. Here is the original Meade Review.

Alan Blinder famously spoofed the economics of brushing teeth (here, JSTOR only).  A. Wuffle also offered a rational choice perspective on the subject [pdf]. Well, mock ye not! A new NBER paper shows that good teeth boost the income of women by 4 per cent. The NBER version is here.  Abstract:

Healthy teeth are a vital and visible component of general well-being, but there is little systematic evidence to demonstrate their economic value. In this paper, we examine one element of that value, the effect of oral health on labor market outcomes, by exploiting variation in access to fluoridated water during childhood. The politics surrounding the adoption of water fluoridation by local water districts suggests exposure to fluoride during childhood is exogenous to other factors affecting earnings. We find that women who resided in communities with fluoridated water during childhood earn approximately 4% more than women who did not, but we find no effect of fluoridation for men. Furthermore, the effect is almost exclusively concentrated amongst women from families of low socioeconomic status. We find little evidence to support occupational sorting, statistical discrimination, and productivity as potential channels of these effects, suggesting consumer and employer discrimination are the likely driving factors whereby oral health affects earnings.

Yes, this is April 1, but the paper is dated March.

A nice paper at last week’s Royal Economic Society conference from Oxford’s Michael Drugov:

This paper studies the consequences of introducing competition between bureaucrats. Bureaucrats are supposed to grant licences to firms that satisfy certain requirements. Firms have to invest into satisfying these requirements. Some bureaucrats are corrupt, that is, they give the licence to any firm in exchange for a bribe. Some firms prefer to buy the licence rather than to invest and satisfy the requirements imposing negative externalities on the society. The competition regime is found to create more ex ante incentives for firms to invest while the monopoly regime is better at implementing ex post allocation, that is, distributing the licences given the firms’ investment decisions. Additional results on the effects of intermediaries, staff rotation, punishments and endogenous entry to the bureaucracy are provided.

Drugov pointed out that, for instance, in India you have only one local bureaucrat you can go to for a driving licence, while in Russia you have a choice of different offices. If bureaucrats demand bribes, which situation is preferable?

The answer, by the way, is not obvious. We prefer bribes to be low if the bureaucrats are extorting from qualified drivers; but if the bureaucrats are colluding to give licences to unsafe drivers, we’d like the bribes to be high. The paper has much more, for those of a technical bent.

Richard Easterlin - he of the Easterlin Paradox - has a new working paper [pdf] out:

In the transition from socialism to capitalism in Eastern Europe life satisfaction has followed the V-shaped pattern of GDP but failed to recover commensurately. In general, increased satisfaction with material living levels has occurred at the expense of decreased satisfaction with work, health, and family life. Disparities in life satisfaction have increased markedly with those hardest hit being the less educated and persons over age 30; women and men have suffered about equally. The asymmetric response of life satisfaction to decreases in GDP in transition countries and increases in GDP in non-transition countries is arguably due to loss aversion.

Here is an earlier essay I produced about the economics of happiness.