Liars and Outliers (40 page)

(15)
There's an
alternate analysis
of the Prisoner's Dilemma that bears this out. So far, we've been doing a fairly straightforward analysis of Alice's and Bob's options to determine which ones are better. One can extend that analysis by taking into account the probabilities that Alice and Bob will choose various options. If Alice and Bob are not complete strangers, they may know something about each other and how the other is likely to proceed. If Alice is in a Prisoner's Dilemma with Bob, and knows that Bob is from the same culture, shares the same religion, and is a member of the same social class, Alice may reasonably anticipate that he will evaluate the situation the same way she does and—in the end—choose whatever option she does. Although she doesn't know Bob's decision beforehand, she knows that she and Bob are enough alike that they will probably choose the same option. Given that assumption, Alice is only choosing between cooperate–cooperate and defect–defect. That's no dilemma at all: cooperate–cooperate is better.

(16)
In general, “
is” does not imply
“ought.”

(17)
The system isn't entirely symmetrical. Once the john tears the bill in half, it's sunk cost. But the prostitute isn't yet at risk. If she doesn't keep her appointment, she doesn't gain but the john still loses his money.

(18)
There is a whole theory that
costly religious rituals
, such as expensive funerals or Bar Mitzvah parties, are a signaling mechanism to demonstrate a variety of prosocial behaviors.

(19)
The more costly and hard-to-fake the signals are, the more likely they are to be trustworthy. Similarly, the higher the stakes, the more likely signals are to be verified. If you're applying for a job as a surgeon, your résumé is likely to be checked more carefully than if you're applying for a job as a waiter.

(20)
As a side note, Maine lobstermen have a system where they notch a “V” into the tails of
breeding females
. Other lobstermen who catch those notched females are supposed to throw them back in the water. This is a societal dilemma that's primarily solved through morals and reputation; the “V” makes cooperation easier by making the females easier to spot and harder to sell.

(21)
Some examples of proverbs that illustrate this:

“The gods visit the sins of the fathers upon the children.” —Euripides (c. 485–406 B.C.), Phrixus, fragment 970.

“For the sins of your fathers you, though guiltless, must suffer.” —Horace, “Odes,” III, 6, l. 1.

“The Lord is long-suffering, and of great mercy, forgiving iniquity and transgression, and by no means clearing the guilty, visiting the iniquity of the fathers upon the sons to the third and fourth generation.” —Exodus 34:6–7.

“The sins of the father are to be laid upon the children.” —Shakespeare,
The Merchant of Venice
, Act III, Scene V, l. 1.

(22)
I tend not to trust ticket scalpers outside of stadiums. I'll never see them again, so they have little incentive not to rip me off. It was better when tickets were hard-to-forge pieces of paper; that was a security system. But now that they're mostly printed receipts of online transactions and verified by bar codes, what's to stop a scalper from reprinting and reselling the same ticket over and over again? I'm essentially buying a sealed bag, and won't know if it's a real ticket or a box of rocks until I get to the gate.

(23)
Reputation doesn't scale down, either. If you're having dinner with your family, no one probably cares how much food you take when. As long as there's trust in this intimate setting, people already know who eats how much and how quickly, and trust that they will get their share eventually. Sometimes this sort of thing happens with close friends or in an intimate business setting, but there's more potential for defection.

(24)
Edney listed several
reasons why a small group size is more effective: there's better communication within the group, it's easier to see how individuals react to scarcity, it's more difficult for individuals to avoid their responsibilities, there's less alienation, and the role of money is reduced. Edney wrote: “The improved focus on the group itself, the greater ease of monitoring exploitive power, and the opportunities for trust to develop among individuals with face-to-face contact are also enhanced.” He doesn't use the terms, but he's talking about moral and reputational pressure.

(25)
Michel Foucalt said
something similar, when he was asked why he participated in student demonstrations when—as a tenured professor—he didn't need to get arrested and beaten up in order to show that he agreed with the student movement. He said: “I consider that it is a cop's job to use physical force. Anyone who opposes cops must not, therefore, let them maintain the hypocrisy of disguising this force behind orders that have to be immediately obeyed. They must carry out what they represent, see it through to the end.”

Chapter 9

(1)
Historically, some countries, like England, France, the Netherlands, and the United States, have even sponsored pirates, giving them the designation of “privateers.”

(2)
There's a
similar system in Sweden
to combat prostitution: the purchase of sex remains illegal, but the sale of sex has been decriminalized.

(3)
There's a lot more here that I am not going to get into. American prisons are nowhere near the forefront of penological science, and what penologists believe prisons are about isn't the same thing as what corrections officers believe prisons are about; and neither of these two things is what the public thinks prisons are about.

(4)
This is why I am using the word “sanction” instead of “punishment.” Punishment implies an expectancy of felt guilt, an emotional satisfaction on the part of the punisher, some sort of existential balance restored. A sanction is a simple
quid pro quo
between the justice system and the accused.

(5)
Moreover, like most drivers, Alice is probably sure her
driving skill is better
than average, so she underestimates the risk that her speeding imposes on others.

(6)
I've always thought that the process of getting pulled over, and the wait while the policeman writes the ticket up, is a bigger incentive to obey the speed limit than the fine for a lot of people. The fine is only money, but getting pulled over directly counterbalances the incentive to speed: it results in you getting to your destination more slowly. The inequity of the same fines being assessed to people of all income levels is partly addressed through a points system, whereby states revoke a driver's license if he gets caught speeding too many times.

(7)
Technically, some taxes operate before (airline tickets), some during (road tolls), and some after (capital gains tax). But for our purposes, what matters is not when the money is collected, but that the tax only applies when someone does a particular thing.

(8)
Electronic filing
makes it easier for the IRS to detect some types of fraud because all the data arrives digitally and can be automatically cross-checked.

(9)
This sort of thing has been observed many times.
Students perform better
on tests when they're told to try their best than when they're paid for each correct answer. Friends are more likely to help you move if you ask as a favor than if you offer them money. Pizza and beer at the end of the move don't count; that's reciprocal altruism. And
salary bonuses
in altruistic jobs can decrease performance. In general, the altruistic portion of a person's brain only works when the thrill center isn't stimulated by the possibility of financial compensation. If you try to stimulate both simultaneously, the thrill center wins.

(10)
Ostrom's original rules are
:

(11)
Jeremy Bentham
believed that crime could be abolished by using two knobs: making crimes harder to commit, and making punishments more draconian. However, he rightly pointed out that the punishment has to fit the crime. If, for example, both rape and murder are punishable by death, a calculating rapist will kill his victim so as to reduce the chance of his arrest. Similarly, if the fine is the same for driving three miles over the limit as it is for driving thirty miles over, you might as well drive faster—you'll get to your destination sooner, and the punishment for being caught is the same.
Gary Becker
expanded on this idea considerably.

(12)
Also note that
increasing the probability
of punishment is often cheaper—and more humane—than increasing the severity of punishment.

(13)
There's also
conflicting evidence
as to whether or not the probability of getting caught has a strong effect on breaking rules. One study measured how much people cheat on tests, given three different scenarios that changed their likelihood of getting caught. The rate of cheating did not increase with the probability that their cheating would remain undetected.

(14)
The trick with this pair of loopholes is to establish
two Irish subsidiaries
: one based in a tax haven that holds the rights to its intellectual property outside the U.S., and another based in Ireland that receives the income gained from that property. In order to avoid Irish taxes, a third subsidiary—a Dutch corporation—serves as a transfer for royalties flowing from the subsidiary in Ireland to the tax haven. This byzantine arrangement is legal, even if those three corporations exist on paper only, and allows the parent company to avoid the IRS, even if it is entirely located in the United States.

(15)
That loophole closed after a year, but a
bigger one opened up
—and it's retroactive.

Chapter 10

(1)
This might be different in Third World countries. In 2010,
someone was sentenced
to three months in jail for stealing two towels from a Nigerian hotel.

(2)
It's not just physical sports. There's
doping in professional Scrabble
. Some players take “smart drugs” like piracetam and modafinil.

(3)
The reality is much more complicated. While I'm sure that all doctors realize that doping is not in the group interest, as do most athletes, the general public is primarily interested in the spectacle and doesn't really care one way or the other.

(4)
In the 1970s, cyclists used corticosteroids and psychostimulants such as Ritalin, and newly developed norepinephrine-dopamine reuptake inhibitors such as Pemoline. They were banned, and by the end of the decade
assays were developed
to detect those substances. In the 1980s, athletes turned to newly developed analogues of endogenous substances made possible through recombinant DNA technology, including human growth hormone, testosterone, anabolic steroids, and synthetic human erythropoietin (EPO). EPO, a glycoprotein hormone that controls red blood cell production, acts to increase oxygenation, an effect valued as highly by endurance athletes as it was by people suffering from anemia.
EPO use became
rampant in cycling and other sports, and continues to be rampant in spite of bans since the early 1990s and the development in the late 1990s of carbon-isotope ratio tests capable of determining whether substances are made naturally by the body or come from performance-enhancing drugs.

Next came
analogues of analogues
, such as darbepoetin alfa (Aranesp), a variation on the theme of EPO that became commercially available in 2001. It swiftly gained a following among bike racers and other endurance athletes; a test to detect it followed in 2003. A
new EPO replacement
, Mircera, found its way to both the medical and sports markets in 2007; assays to detect it were developed by 2008.

Norbolethone, first developed in 1966, was resurrected in the late 1990s and marketed as the
first designer steroid
by an entrepreneurial bodybuilder-turned-chemist intent on evading detection by the doping police.
Its fingerprint
was traceable by 2002. This
scenario was replayed
with tetrahydrogestrinone and madol, with assays developed within two years of their introduction into sports. The mid-to-late 2000s have seen an increase in blood doping: the use of blood transfusions to increase blood oxygen concentrations. This was soon followed by the development of
flow cytofluorometry
tests to detect it.

The as-yet-unrealized prospect of
gene doping
has led regulatory bodies to preemptively ban any non-therapeutic uses of genetic technology in sports. Presumably tests to detect athletes using them will follow.

(5)
In at least two instances, positive tests for norandrosterone, a steroid of which traces are found naturally in human urine, have been traced to
adulterated supplements
consumed by unsuspecting bicycle racers. Another athlete tested positive for benzodiazepine after consuming a
Chinese herbal product
. The most widely used
urine test for EPO
has been found to result in false positives in urine collected after strenuous physical exercise, though this conclusion has been
hotly contested
by the test's developer and others.
Rapid-screen immunoassays
—the most widely used tests—all too frequently yield false positives in individuals taking routine over-the-counter and prescription pain relievers and allergy, and acid reflux medications. Alpine skier Alain Baxter won the first British medal in Alpine skiing at the 2002 Winter Games in Salt Lake City. Two days after his victory, he was forced to return the bronze medal due to a positive test for methamphetamine resulting from a
Vicks Vapor Inhaler
.