Economic Sociology II

Just another note about the Postrel article...

I need to study up on Brian Uzzi

Uzzi finds that businesses do best when they find a ''bliss point," combining just the right mix of arm's-length and ''embedded" relationships. Strictly economic relations bring in new information, while more personal connections are better at solving specific problems. In looking for bank loans, small businesses find out about interest rates and new loan structures by shopping the market, but they get customized deals from the aptly named ''relationship managers" at their existing banks.

''What my work showed was that really neither approach, in its purest form really works best," says Uzzi ''If people are purely rational and atomistic, they underproduce. If people care entirely about community and ignore what market signals are giving out, they don't do well. Those that do best are those that find a balance."

This raises a question I've thought of a couple of times. What does effect "customer engagement" have on the economy? Its not just "branding" and finding ways to price discriminately--it has to do with creating value. Having information about what your customer want/need increases the value of your market transactions with them, not just for you, but for them as well.

I also need to read Postrel's book: "The Substance of Style: How the Rise of Aesthetic Value Is Remaking Commerce, Culture, and Consciousness"

Economic Sociology

Virginia Postrel, a well respected blogger and author, comments on Economic Sociology in the Boston Globe. Economic Sociology is the application of Sociology's tools and frameworks to markets and the topics normally monopolized by economicts. This is only fair, she writes, because economists have been applying their models and theories to social structures for decades now. We might call that Social Economics.

The application of Economic Sociology that immediately leaps into my mind is economic development and growth models. Economists have been stumped for years as to why some countries grow with viral capitalist economies and other have been stagnating for centuries. We have run millions of regressions correllating international trade and openness, labor force education, savings rates and capital investment, and a million other variables with growth. Most recently the focus has been on economic institutions such as stable, uncorrupt government, central banks and monetary institutions, ect... But while we know what a healthy economy looks like, creating one is a different sort of task.

How might understanding culture lead to better solutions? How much better can we explain and predict economic growth when accounting for culture or other socio-economic variables? These are exciting questions. As Robert Lucas says:

The consequences for human welfare involved in questions like these are simple staggering: Once one starts to think about them, it is hard to think about anything else.

Moneymaker

Moneymaker did not change poker.

I'll heard or read that "Chris Moneymaker changed poker" several times over the last few weeks as the 2005 World Series of Poker reached its conclusion. Sure the year after Chris Moneymaker won the WSOP its size more than doubled. Then the year after that the field more than doubled again for the championship event. This has more to do with the World Poker Tour and the explosion of other televised poker since 2003 than with any single champion.

And don't get me wrong, I'm not one of those guys saying that the WPT changed poker either. At least not in the way that it is normally meant. The typical explanation for the WPT's shocking success is its "revolutionary" pocket cam. The Wall Street journal glorified this innovation proclaiming "for the very first time, viewer can see the player's hole cards." For years ESPN has shown us hole cards before the hand is over by simply finding out what the cards were after the hand was over, and going back and putting it in the taped broadcast or by using a similar type of hole-cam. Neither program comes close to showing half of the hands played so the new found popularity can't be explained by viewers being treateded to more information.

People watch poker on TV because they want to see their favorite pro win, not because they want to see some schmuck get lucky and have victory fall in his lap. They wanto to see drama, not gambling. That's one thing the WPT does well.

Sure, Moneymaker will be remembered as the first poker champion of a new era. However, this makes me feel sorry for another unlikely amatuer who happened to win 1 year before Chris. Does anybody remember Robert Varkonyi?

Pokernomics

Noooooooo. That damn Freakonomics guy beat me to it. I was just thinking the other day about how great it would be to analyze the data from an online poker tournament.

That's okay. He'll do a piss poor job, and I'll re-do it. He is asking people to voluntarily send in their hand histories from playing online. Hmmm, there couldn't be any self-selection bias there could there? Is he going to combine all the data from low-limit and high-limit and no-limit, tournaments?

The real travesty here is the same as the book, the name. Pokernomics. This has nothing to do with Economics. It is an economist applying statistical methodologies to various subjects. I'll stick with Super System.