Prices and Earnings: A Comparison of Purchasing Power Around the Globe

Prices and Earnings: A Comparison of Purchasing Power Around the Globe Data on about 70 cities x (9 categories of goods & services + wages). Includes economic explanations for different patterns between different categories, e.g. the price of urban housing is anomalously heteroscedascitous (did I invent a new word?) given the local income because it's such a static good: you can't export it, quickly adapt to changes in demand, etc.

It's interesting to notice that income plays such an important role in prices i.e. the richer you are, the more you pay. This means, of course, that producers are more interested in richer consumers.
If exports were fluid, the discrepancies in prices would mostly disappear: you could simply order all your clothing from Brazil and all your food from Eastern Europe. Likewise, if we had fluid transportation, everyone could live cheaply in the Australian desert and commute to our favorite places, but that's too far away (in the future).

Anyway, I really enjoy thinking about economics, finding common-sense constraints, reasoning about which equilibria are reasonable, etc
One common sense thing about the above report is that there is a positive cost-intersect: even in Africa where people earn nothing, it still costs something to buy things (in fact probably more than in slightly richer places, since almost everything in poverty-stricken places has the status of "special order": even shipping to such a place will be almost a "special order"). The point is that there is a real, positive production cost, which tends to get overshadowed by the demand in places like Oslo and Tokyo. In such places, the difference in price between the price of apples and oranges should be almost entirely due to taste: the cost of production is almost completely irrelevant (assuming equal exportation costs and perfect local competition). My hypothesis could be tested across Western European populations: the places where the average person likes oranges more, oranges will be more expensive; whereas in 3rd world countries, the prices will be more closely associated with the cost of production. Make sense?

But something feels wrong about my reasoning: since there is enough variation in taste in rich countries, it doesn't matter if only 5% of Britain likes oranges, since that's enough for mass exportation. So now that I've changed my mind, the question is: do differences in prices (e.g. apple/orange ratio) of imported goods EVER reflect differences in taste across nations (I'm looking for a positive correlation here, not a negative one like "eccentric consumers pay more")?
Another complicating factor: people end up liking things they consume for too long, so poor people will end up liking cheap things.

Some day I need to get around to writing a dynamic systems simulator. My imagined application is modeling feedback loops in sugars, hormones, organ function, etc in the human body (one could be about "why dieting is hard"), but I can see it modeling economics too.

when reasoning under uncertainty, is probability theory enough? Cheeseman vs Halpern

I had seen this paper before, but I didn't realize that it echoed my feelings so well.

In Defense of Probability
Peter Cheeseman, SRI International

Abstract
In this paper, it is argued that probability theory, when used correctly, is sufficient for the task of reasoning under uncertainty. Since numerous authors have rejected probability as inadequate for various reasons, the bulk of the paper is aimed at refuting these claims and indicating the sources of error. In particular, the definition of probability as a measure of belief rather than a frequency ratio is advocated, since a frequency interpretation of probability drastically restricts the domain applicability. Other sources of error include the confusion between relative and absolute probability, the distinction between probability and the uncertainty of that probability. Also, the interaction of logic and probability is discussed and it is argued that many extensions of logic, such as ``default logic'' are better understood in a probabilistic framework. The main claim of this paper is that the numerous schemes for representing and reasoning about uncertainty that have appeared in the AI literature are unnecessary -- probability is all that is needed.

But here is a direct attack:

Let Many Flowers Bloom: A Response to "An Inquiry into Computer Understanding"
Joseph Y. Halpern

1 Approaches to uncertainty
Cheeseman makes a number of strong statements in Inquiry and Defense. Perhaps the most important of them can be summarized by the following two claims: (1) all the information we have about a situation about which we want to reason can be best represented in terms of probabilities, and (2) if we get new information, we should use Bayes' rule of conditioning to update our earlier probabilities.
Probability is a good method for representing uncertainty. I consider it to be the best (and certainly the best understood!) of all the methods currently available. I suspect it will end up being the method of choice for many applications. Indeed, I believe that many of the other methods proposed for reasoning under uncertainty can be best understood in terms of probability theory. (See, for example, [HF89] for some discussion and further references on the issue of how the Dempster­Shafer approach can be understood in terms of probability theory; see [Gro86, Hec86] for a discussion of how MYCIN's certainty factors can be understood in terms of probability theory.) However, it does not follow that probability should be the method of choice for every application (or for all parts of any one application).
Even if one is firmly committed to using probability theory, one does not have to be a Bayesian. There are many problems with the Bayesian position espoused by Cheeseman, mainly stemming from the question of how to assign probabilities and how they can be computed. Since these issues have been discussed at length in the literature, I will just briefly review them here. ...