Game theory of thrones

Peter Antonioni uses game theory to analyze the situation in Westeros to see if he can determine who will end up on the Iron Throne.

Game theory doesn’t look at behaviour so much as it looks at outcomes, assuming that people will choose the highest payoff if they can.

Martin even helps on a couple of occasions by spelling out those payoffs. Advising Joffrey, the fearsome Tywin Lannister gives a great example of what to do in a repeated game:
 
Joffrey, when your enemies defy you, you must serve them steel and fire. When they go to their knees, however, you must help them back to their feet. Elsewise no man will ever bend the knee to you.
 
This is a pretty good distillation of a what game theorists call tit-for-tat. If you start off with equal participants in a repeated game, the best overall strategies combine punishing transgression with forgiveness; there are variants, but all of them get better results than “all or nothing” punishment strategies such as the grim trigger.
 
Tywin’s strategy works in this case because it assumes a capability for punishment. In advising Joffrey, he’s not telling him how to gain the Iron Throne but how to hang on to it. The equilibrium stays stable as long as the Throne can dominate all of the potential competitors, as Aegon I could with his dragons. Then, rebellion is easily put down, and whatever the consequence to the smallfolk of Westeros, at least they don’t get the kind of devastation inflicted on the Riverlands by the War of the Five Kings.
 

The strategic maneuvering and statecraft are the most intriguing aspects of Game of Thrones. I'm less interested in the economics or religion, though I was amused by this proposal for a central bank in Westeros.

Overall, the rulers, religions, and other institutions of the known world all seem to lack the fundamental characteristics necessary to function as a central bank of Westeros. The difficulty of creating long lasting, independent, and benevolent institutions, I would argue, is why the Seven Kingdoms of Westeros use a commodity currency and lack monetary policy. But I don’t think a central bank in Westeros is impossible. In fact, there is one institution in the realm that does have these characteristics and could potentially serve as a central bank: the Night’s Watch.
 
The watch operates independently of the crown, has existed for thousands of years, and is dedicated to the public good. The longevity of the Watch is undebatable, as it was reportedly founded 8,000 years before the time of Game of Thrones.   Their staunch independence is evidenced by the nuetrality they maintained during the rebellion that unseated the Targaryens. The Watch’s military might ensures they can maintain that independence. Their dedication to the public good is seen in the mission of the Watch, which is the protection of the Seven Kingdoms.
 
Members of the watch currently serve in one of three groups: Rangers, Builders, and Stewards. It’s easy to imagine adding Economists as a fourth group, and adding price stability and full employment to oath that all members must swear to. Public acceptance would likely require the crown mandating that Night’s Watch currency be accepted as legal tender. But after that, the Night’s Watch could independently determine the money supply and even conduct monetary policy.
 

Sawmell Tarly, Westeros Fed Reserve Chairman?

The end of routine work

In recessions of the 1960s and 1970s, routine jobs would fall during the recession but quickly snap back. But after the recession in 1990, something changed. Routine jobs fell and, as a share of the population, never recovered. In the recessions in 2001 and in 2007-09 they fell even further. The snapback never occurred, suggesting that many firms began coping with recessions by scrapping tasks that could be automated or more easily outsourced.
 
For his part, Mr. Siu thinks jobs have been taken away by automation, more than by outsourcing. While some manufacturing jobs have clearly gone overseas, “it’s hard to offshore a secretary.” These tasks more likely became unnecessary due to improving technology, he said.
 
In the late 1980s, routine cognitive jobs were held by about 17% of the population and routine manual jobs by about 16%. Today, that’s declined to about 13.5% and 12%. (The figures are not seasonally adjusted and so are displayed in the chart as 12-month moving averages, to remove seasonal fluctuations).

...

But they are not among the labor market’s pessimists who fear that robots will render humans obsolete. Their work shows the economy has continued to generate jobs, but with a focus on nonroutine work, especially cognitive. Since the late 1980s, such occupations have added more than 22 million workers.
 

By Josh Zumbrun. The idea that U.S. unemployment has jumped to a higher plateau because of jobs moving overseas or because they're replaced by technology is not a new one, but it's useful to see data and charts to support the claim.

Brad Delong comments:

Note that these jobs are “routine” only in the sense that they involve using the human brain as a cybernetic control processor in a manner that was outside the capability of automatic physical machinery or software until a generation ago. In the words of Adam Smith (who probably garbled the story):
 
In the first fire-engines, a boy was constantly employed to open and shut alternately the communication between the boiler and the cylinder, according as the piston either ascended or descended. One of those boys, who loved to play with his companions, observed that, by tying a string from the handle of the valve which opened this communication to another part of the machine, the valve would open and shut without his assistance, and leave him at liberty to divert himself with his playfellows. One of the greatest improvements that has been made upon this machine, since it was first invented, was in this manner the discovery of a boy who wanted to save his own labour…
 
And Siu and Jaimovich seem to have gotten the classification wrong: A home-appliance repair technician is not doing a routine job–those jobs are disappearing precisely because they are not routine, require considerable expertise, are hence expensive, and so swirly swapping out the defective appliance for a new one is becoming more and more attractive.
 

As any economist would prescribe, it's become more critical when thinking about one's career and education to focus on humans' comparative advantage versus computers. But I also recommend people focus on their own unique comparative advantage: any intelligent person can do many things, but what can you do better than most anyone else? In winner-take-all markets, more common in this third industrial revolution, it's ideal to give yourself the best chance to be one of those winners, and consider it a bonus that those areas often overlap with one's personal passions (whatever you think of the 10,000 hour rule, most would agree it's easier to sustain through so many hours if one is more emotionally invested).

It's also best to accept that one will have to learn new skills many times in one lifetime. It used to be that once you finished college, the education phase of life was considered over. This is already obsolete for many. Even most programmers, supposedly the most insulated workers from technological job obsolescence, have to learn new programming languages or technologies on the job every few years now.

In the future, education will generally be accepted to mean a lifelong process. Continuing education will be the default. An undergraduate degree will simply be a first milestone in signaling one's skills and sociability to potential employers. More time will have to be set aside to level up, and resources and services to support this lifelong education continue to proliferate. I view the need for lifelong learning as a positive. Who was it that said that you're young at heart to the degree that what you want to learn exceeds what you already know?

Seriously, who said that? I don't know. Add that to my list of things to learn.

Payments as social network

Generally speaking, Venmo peaks around 7 pm on the east coast of the US and stays fairly strong until about 3am, which is midnight on the west coast. The timing—and corresponding emoji—suggests the preponderance of Venmo transactions are people paying each other back for dinner and drinks.
 
Emoji use is markedly different at quieter times of the day. For example, the house emoji ranks highly from 7 am to 3pm EST. And the car and taxi emoji crack the top five between 5am and 8am EST.
 
...
 
Some of these data are skewed by messages containing a lot of emoji. The “pile of poop” emoji only holds the top spot in the midnight hour because a single payment used it 1,116 times.
 

On the usage patterns for the payment service Venmo, as interpreted by the emoji used to tag public transactions.

I like to think I'm young at heart, but the fact that Venmo is also a social network makes me feel old. Payment transactions are one form of community interaction, sure, but looking through my Venmo feed feels like peering through a fog of data pollution. Perhaps the next generation of kids really does live with their default life privacy settings toggled to public.

Speaking of the pile of poop emoji, it seems only a matter of time until someone releases an app that allows you to broadcast when you are taking a poop. It should be a mobile app just called Poop. I leave it to the design geniuses at Apple to figure out what type of haptic feedback a poop notification should emit on the Apple Watch.

The rise of the intangible corporation

Justin Fox quotes Oxford business professor Colin Mayer riffing off of the seven age of man from Shakespeare's As You Like It.

At first the merchant trading company established by royal charter to undertake voyages of discovery and promote commerce around the world. 
 
Then the public corporation created by Acts of Parliament to engage in major public works and the building of canals and railways. 
 
Then with the freedom of incorporation in the 19th century, the private corporation -- the seedbed of the industrial revolution and the manufacturing corporation.
 
Next comes the service firm and the rise of the financial institution.
 
The fifth age is the transnational corporation putting a girdle around the world and running rings around national governments.
 
Last scene of all that ends this strange eventful history is the mindful corporation -- sans machines, sans man, sans money, sans everything.
 

Mayer uses WhatsApp as his canonical example of a company with no assets and very few employees and yet a huge market cap (given its $22 billion purchase by Facebook), but just a short while before that Silicon Valley was all abuzz about Instagram for the same reason, albeit a lower price in relative terms.

Just wait until VR goes mainstream. The most valued bricks and mortar and real estate of today are digital. It's a lot cheaper than the real thing, and a whole lot less regulated, too. Tech companies do love their degrees of freedom.

Why there are faux Irish pubs everywhere

Ireland, as much of the world knows it, was invented in 1991. That year, the Irish Pub Company formed with a mission to populate the world with authentic Irish bars. Whether you are in Kazakhstan or the Canary Islands, you can now hear the lilt of an Irish brogue over the sound of the Pogues as you wait for your Guinness to settle. A Gaelic road sign may hang above the wooden bar and a fiddle may be lying in a corner. As you gaze around, you might think of the Irish—O, that friendly, hard-drinking, sweater-wearing people!—and smile. Your smile has been carefully calculated.
 
In the last 15 years, Dublin-based IPCo and its competitors have fabricated and installed more than 1,800 watering holes in more than 50 countries. Guinness threw its weight (and that of its global parent Diageo) behind the movement, and an industry was built around the reproduction of "Irishness" on every continent—and even in Ireland itself. IPCo has built 40 ersatz pubs on the Emerald Isle, opening them beside the long-standing establishments on which they were based. 
 
IPCo's designers claim to have "developed ways of re-creating Irish pubs which would be successful, culturally and commercially, anywhere in the world." To wit, they offer five basic styles: The "Country Cottage," with its timber beams and stone floors, is supposed to resemble a rural house that gradually became a commercial establishment. The "Gaelic" design features rough-hewn doors and murals based on Irish folklore. You might, instead, choose the "Traditional Pub Shop," which includes a fake store (like an apothecary), or the "Brewery" style, which includes empty casks and other brewery detritus, or "Victorian Dublin," an upscale stained-glass joint. IPCo will assemble your chosen pub in Ireland. Then they'll bring the whole thing to your space and set it up. All you have to do is some basic prep, and voilà! Ireland arrives in Dubai. (IPCo has built several pubs and a mock village there.)
 

The strange true-life story of how Ireland packaged and exported a version of its culture all over the world, and how it boomeranged back to Ireland in the form of added tourism revenue. As with technology apps these days, it's all about marketing and distribution.

California's water shortage

The recent report that California has just one year's worth of water left has made the rounds. Alex Tabarrok has a good primer or overview on the situation.

California has plenty of water…just not enough to satisfy every possible use of water that people can imagine when the price is close to zero. As David Zetland points out in an excellent interview with Russ Roberts, people in San Diego county use around 150 gallons of water a day. Meanwhile in Sydney Australia, with a roughly comparable climate and standard of living, people use about half that amount. Trust me, no one in Sydney is going thirsty.
 
So how much are people in San Diego paying for their daily use of 150 gallons of water? About 78 cents. As Matt Kahn puts it:
 
Where in the Constitution does it say that the people of California have the right to pay .5 cents per gallon of water?
 
Water is such a small share of most people’s budgets that it could double in price and the effect on income would still be low. Moreover, we don’t even have to increase the price of water for residential or industrial uses. As The Economist points out:
 
Agriculture accounts for 80% of water consumption in California, for example, but only 2% of economic activity.
 
What that means is that if agriculture used 12.5% less water we could increase the amount available for every residential and industrial use by 50%–grow those lawns, fill those swimming pools, manufacture those chips!–and the cost would be minimal even if we simply shut down 12.5% of all farms.
 

Water should cost more, and a few farms should shut down. Sounds sensible.

Wage inequality

A novelist, academic and CEO might have very similar intellect and skill levels, but their income could differ by factors of thousands - and, as Will points out, academics' working conditions are deteriorating. Why the difference?

The conventional neoclassical answer is that wages equal marginal product, and that CEOs have a higher marginal product than others. This is a just-so story which glosses over a lot.

For one thing, what matters is that one's product be monetizable and appropriable. The great writer or musician creates an enormous amount of consumer surplus, but she cannot capture this for herself. Quite the opposite; as Gillian Welch sang*, she is under pressure to give away her work. Similarly, if you believe human capital theory, academics - at least the better ones - create billions of pounds of value. But they don't see much of it. By contrast, the CEO's output is more monetizable.

On marginal product and incomes. Five reasons are offered for why the CEO makes so much more, it's worth a read.

I link to this post because a lot of folks in tech have the same misconception about the money-making potential of their app or business as people have about wages, that they simply equal marginal productivity. If only life were so simple.

Maybe this is how it ends, with lots of early retirements

Today, Yahoo Sports reported that 49ers linebacker Patrick Willis is retiring at the age of 30. It was a surprise to many that the five-time All Pro and seven-time Pro Bowler would retire with seemingly more good years ahead of him.

With the severity of the physical trauma of football becoming clearer and clearer by the day, I wonder if more and more players will choose to retire earlier in their careers, after accumulating some threshold of wear and tear and/or wealth.

Economically, it makes sense. A star player can make many tens of millions of dollars in a the span of a short career, and even a regular starter can pocket millions. If you are frugal, you'll achieve a very comfortable nest egg. At that point, is each additional marginal million dollars worth perhaps several years of your life, or a remaining lifetime of debilitating pain, or worse?

The more we hear about players suffering terribly in their old age, the more the cost side of the economic equation increases. Given that data, more and more will come to see just how rational Willis' decision is.

UPDATE (16 Mar 2015): Chris Borland of the 49ers announced today that he's retiring after just one season, and a great one, because of concerns over the impact of repetitive head trauma on his health. It's happening even sooner than I anticipated.

"I just honestly want to do what's best for my health," Borland told "Outside the Lines." "From what I've researched and what I've experienced, I don't think it's worth the risk."
 
Borland becomes the most prominent NFL player to leave the game in his prime because of concerns about brain injuries. More than 70 former players have been diagnosed with progressive neurological disease following their deaths, and numerous studies have shown connections between the repetitive head trauma associated with football, brain damage and issues such as depression and memory loss.
 
"I feel largely the same, as sharp as I've ever been. For me, it's wanting to be proactive," Borland said. "I'm concerned that if you wait till you have symptoms, it's too late. ... There are a lot of unknowns. I can't claim that X will happen. I just want to live a long healthy life, and I don't want to have any neurological diseases or die younger than I would otherwise."