Separating Facebook users: 4.74 Degrees

January 11, 2012 5 Comments

Remember my less-than-epic, although very entertaining, quest to confirm or deny the famous Six Degrees of Separation experiment, originally conducted by Stanley Milgrim?  My goal was to send out letters, as in the original experiment, and have those recipients do their best to get those letters to a named someone in Boston.  Each link in the chain would write down their name on the letter, and, by the end, we’d have a list of how many people the letter went through to get to that final person.

You might remember that not one letter made it to my contact in Boston.

Many other groups have turned to Facebook to answer the question. Several failed, fake, or ineffective “Six Degrees” Facebook groups have popped up.

However, just a few months ago, the University of Milan partnered with Facebook to report that the average number of acquaintances separating any two people in the world was not six, but 4.74.

The new research used data from 721 million Facebook users, more than one-tenth of the world’s population. Facebook posted the results on their data facebook page.

From the New York Times article:

The experiment took one month. The researchers used a set of algorithms developed at the University of Milan to calculate the average distance between any two people by computing a vast number of sample paths among Facebook users. They found that the average number of links from one arbitrarily selected person to another was 4.74. In the United States, where more than half of people over 13 are on Facebook, it was just 4.37.

That being said, Facebook users are probably a self-selected bunch.  In this case, the people who use Facebook are those who have online access and choose to use Facebook.  They might be better connected individuals than those who do not use Facebook.

Importantly, this study raises questions about definitions like “friend,” “acquaintance,” or “guy you met one time on the bus.”  Which of those actually counts as a connection?

Either way, it’s pretty exciting to know that we’re only a few introductions away from people like Hugh Laurie and David Cameron.*

*If anyone here is Facebook friends with them, let me know.

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Game Theory of Black Friday

November 25, 2011 1 Comment

If you’re reading this real-time, you’re probably not out shopping.

Black Friday, the day after Thanksgiving, is a day of shopping madness, and is sometimes considered the beginning of the Christmas shopping season. Most major retailers open extremely early andd offer promotional sales to kick off the shopping season.

A few days ago on NYT, Robert H. Frank described Black Friday as a retail race to the bottom in terms of a zero-sum or negative-sum game:

In recent years, large retail chains have been competing to be the first to open their doors on Black Friday. The race is driven by the theory that stores with the earliest start time capture the most buyers and make the most sales. For many years, stores opened at a reasonable hour. Then, some started opening at 5 a.m., prompting complaints from employees about having to go to sleep early on Thanksgiving and miss out on time with their families. But retailers ignored those complaints, because their earlier start time proved so successful in luring customers away from rival outlets.

Tyler Cowen, of MarginalRevolution, has a different opinion.  Based on the fact that early December has in general the cheapest prices of the year, not Black Friday, he says:

Dare I suggest that some people like waiting in those lines with their thermos cups and stale bagels.  You could try to argue they are “forced to do so,” to get the bargains, but in a reasonably competitive world  each outlet will (roughly) try to maximize the consumer surplus from visiting the store, including the experience of waiting in line.

All I know is that a few of my colleagues were more excited to go home for Black Friday than for Thanksgiving on Thursday.

Wondering why Rebecca Black’s face is the photo for this post?  Check out the commercial below.  Read about it here.

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Economics of the Future

January 14, 2011 3 Comments

Okay.  So we’ve got economics.  And then we’ve got behavioral economics.  What’s the difference?  What does one have to do with the other?

Economics, as we know, is the study of how money, goods, and services move between people and groups.  Behavioral economics uses emotional, social, cognitive, and psychological factors to figure out how – and why – people make decisions that lead to the movement of money, goods, and services.

So what?

Well, economics is based on the idea that all humans make completely rational, logical decisions, all the time, everywhere.  Behavioral economics says well, perhaps that’s not quite true.

So how do economics and behavioral economics mesh?  What does the future of these two very closely-related fields look like?

The leaders in behavioral economics – some of my personal heroes – have been weighing in on the issue.  Here’s what they’ve been saying about how behavioral economics will – or won’t – make an impact on traditional economics.

George Loewenstein and Peter Ubel, via NYTimes:

Behavioral economics should complement, not substitute for, more substantive economic interventions. If traditional economics suggests that we should have a larger price difference between sugar-free and sugared drinks, behavioral economics could suggest whether consumers would respond better to a subsidy on unsweetened drinks or a tax on sugary drinks.

But that’s the most it can do. For all of its insights, behavioral economics alone is not a viable alternative to the kinds of far-reaching policies we need to tackle our nation’s challenges.

And Dan Ariely, via his blog:

I do hope that the debate between standard and behavioral economics will not take the shape of an ideological battle. We would make little progress if the behavioral economists took the position that we have to throw standard economics—invisible hands, trickle-downs, and the rest of it—out with the bathwater. Likewise, it would be a shame if rational economists continue to ignore the accumulating data from research into human behavior and decision making. Instead, I think that we need to approach the big questions of society (such as how to create better educational systems, how to design tax systems, how to model retirement and health-care systems, and how to build a more robust stock market) with the dispassion of science; we should explore different hypotheses and possible mechanisms and submit them to rigorous empirical testing.

Tim Harford weighed in a bit later, as well: “If behavioral economists do not really understand why we do what we do, there are surely limits and dangers to the project of nudging us to do it better.”

Feel free to click through to the rest of the articles.

Are they saying the same thing?  Or something subtly different?  Should economics be reworked to include findings from behavioral economics, or is behavioral economics masquerading as a somewhat more legitimate form of psychology?

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Prisoner’s Dilemma: Your Kids Know Game Theory

January 4, 2011 1 Comment

Another example of the ubiquity of economics.  Prisoner’s Dilemma, it seems, isn’t all that difficult to grasp, at least at the basic level.

Via Freakonomics:

“A reader named Clark Case, who lives in Aurora, Ohio, and works as a product manager, writes in with a child-rearing observation. His kids are 7 and 4; his wife is a homemaker:

My wife came up with a punishment method for my kids that I thought that you (and perhaps your blog readers) would find interesting.

When the kids get to tussling and or screaming at each other in such a way that she is finding aggravating, she will send them to their respective rooms with the stipulation that they can come out when they both agree to apologize to each other.

Game theory, I suppose, would argue that they should immediately apologize to one another to minimize the period of detention. What seems to happen, though is that one will think that the other deserves some extended detention and will give up freedom himself in order to see that the other gets it.”

This is essentially a modified version of the infamous Prisoner’s Dilemma.  Prisoner’s Dilemma is one of the fundamental problems in game theory.  It’s used to demonstrate why two people might not cooperate, even when it’s clear in the best interests of both of them to do so.   In this case, it’s clear that the best option is for the children to apologize immediately.

In the traditional form of Prisoner’s Dilemma, the players are two criminal suspects, arrested by police without enough evidence to convict the suspects.  The police place the prisoners in separate cells, where they are offered the same deal: if one testifies against the other (an act called “defecting”) and the other remains silent (“cooperating”), the defector goes free, and the silent prisoner receives a full sentence.  If both are silent, both prisoners are sentenced to only six months in jail.  If each betrays the other, each receives a five year sentence.  Each prisoner much choose to betray the other, or remain silent.

How should the prisoners act?  What would you do?

In this traditional form of the game, the best strategy – what we call the “strictly dominated” strategy – is defecting: ratting out your partner.  The only possible equilibrium for the traditional game is for all players to defect.

What happens if the game is played repeatedly? This changes the dynamics slightly.  You can read more about it on the infamous Wikipedia.

Some of my readers have admitted – off the record – to using game theory and behavioral economics to solve household disputes.  Anyone want to share their conflict resolution strategies?

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Why New Year’s Resolutions Fail

December 31, 2010 7 Comments

Four out of five of us don’t keep our New Year’s resolutions.  You have a better chance of getting accepted into University of Southern California‘s undergraduate program than of keeping your New Year’s resolution.

Why is this?

In one famous TED talk, Derek Sivers posits that we set ourselves up for failure by publicly declaring a goal.  According to Sivers, “secret goal-setting” is proven to work by hard social science testing and “social reality” theory.  Sivers suggests that when we announce a goal, our mind is tricked into thinking that we’ve already achieved it.  Therefore, we are less likely to work towards actually accomplishing the goal.

On the other hand, there’s a plethora of research showing that public commitment to a goal increases the likelihood that it will be achieved. Freakonomics wrote an entire article to this effect, effectively refuting Sivers’s claim. “The mere possibility,” Ian Ayres writes, that someone “will notice that you are not following through on your commitment is sufficient to add the extra layer of accountability.”

I think we fail because we fail to set achievable goals.  A good goal should be measurable – “Lose weight,” for example, isn’t as effective is “Lose 10 pounds.”  Having a plan of action – “Go to the gym three times a week” – doesn’t hurt, either.

Part of me wonders if declaring a New Year’s Resolution is a method of social signaling.  Even though we know we might fail, having a resolution is letting our social circle know that we aren’t perfect, but we’re actively working to improve ourselves anyway.

Alternatively, it could be Optimistic Bias – the same bias that newlyweds suffer from.  Newlyweds ”almost uniformly expect that their marriages will endure a lifetime,” despite the large proportion of marriages that end in divorce.  It’s the same reason that we all think we’re better than average drivers.

Maybe we’re just resolutely optimistic on New Year’s Eve.

In 2010, I committed to run 1,000 miles. I succeeded: I will have run 1,724 miles in 2010.  For 2011, I’m committing to learn Russian.

What’s your New Year’s resolution?  One a scale of 1 to 10, how likely do you think you are to succeed?

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