Wednesday, September 30, 2009

Emptying the Bottle: September '09 Links List

1) Economics of Fairy Tales

2) Does 1 abused woman equal 100 abused puppies?

3) What is Conservatism? Progressivism?

4) The greatest person you've never heard of recently died

5) Final words from death row inmates

6) Homeless people trade laughter for money

7) Car crash from 2009 vs. 1959

8) Baby agrees with Kanye (via Alyssa)

9) Economics of 3-D movies

10) The best of Time's best inventions of 2008:

Monday, September 28, 2009

Economics of Reader Requests

In case you haven't noticed I really like using the tools of economics to explain the world around me. I figured I'd test out my economic detective skills by asking my readers if they have any issues or questions they think I may be able to shed some light on. Well, do you?

Saturday, September 26, 2009

Politics of Van Manufacturing

Several times a month, Transit Connect vans from a Ford Motor Co. factory in Turkey roll off a ship here shiny and new, rear side windows gleaming, back seats firmly bolted to the floor.

Their first stop in America is a low-slung, brick warehouse where those same windows, never squeegeed at a gas station, and seats, never touched by human backsides, are promptly ripped out.

The fabric is shredded, the steel parts are broken down, and everything is sent off along with the glass to be recycled.
Why would any business have such a wasteful production process? It's not a result of economic efficiency, but instead the consequences of political policy. Ford does this to redefine the van as a "wagon" to avoid a 50 year old trade tariff. Read the article for the details.

Friday, September 25, 2009

Economics of Engagement Rings

The Freakonomics Blog recently gave its readers a chance to ask author, blogger, and economist Tim Harford questions. His answers are all worth reading, but here's my favorite:
Q. It doesn’t seem rational for a young man to give his girlfriend an expensive engagement ring when he proposes. My thought is that the most efficient use of that dollar is to invest it into something that a young couple would value most e.g. a down payment on a first house, etc. The diamond market is a monopoly and diamond prices are manipulated so that prices are always high. Can you construct a concise and logical argument that young men across the world can use to not buy diamond rings? After all, you already are offering the most valuable thing that you have (your heart) to your soon-to-be bride.

A. You have a point. Engagement rings took off in the U.S. when the courts refused to hear “breach of promise” lawsuits. These suits were brought by women who had slept with their fianc├ęs and then been abandoned. These women were then less attractive marriage prospects for anyone else.

Naturally, such lawsuits were sensational fun for the newspapers, and eventually the courts put a stop to the whole thing. The problem then became: how could a young affianced couple have sex with each other when she had no recourse to the law if he changed his mind? Both of them might well want to, but for the lady the risks were pretty high. And so the institution of the engagement ring came about. Such rings are non-returnable, meaning that if the man breaks off the engagement he doesn’t get the ring back. The system discourages him from running off and provides automatic compensation if he does. Very clever.

Given all this history, I tend to agree with you. Tell your girlfriend that you doubt she is a virgin and don’t care much either way, and you will thus be spending the engagement ring money on something more useful. Be sure to let me know how it works out for you.

Thursday, September 24, 2009

Drug Decriminalization Has "No Adverse Effect"

After 8 years of not punishing and starting treating drug use and possession, Portugal has seen only benefits. The Economist reports that drug trafficking, drug-related STD's, overdose deaths, drug-abuse by the young all decreased. No block quote for this one; the article is short and worthwhile.

Wednesday, September 23, 2009

Maslow's Hierarchy of Teacher Responsibilities

I've been thinking lately about what my responsibility is as an educator. First and foremost it my job to present information and then measure student understanding. This is important for what I see as the three main purposes of public education: creating knowledgeable citizens, future job training, and signaling (intelligence and effort). However, in the last couple decades K-12 schools have been forced to wear more than just a teacher's hat (or should I say sweater vest with an apple on it). If you're familiar with Maslow's Hierarchy of Needs, then you know humans can't learn if their more basic needs have not been met. A student can't problem solve if they are hungry, unsafe, or desperately removed from relationships. This implies that an effective school will close the gap when these needs are unfulfilled. So it seems my job just got a lot more complicated.

Lucky for me public schools spend tons of cash on non-instructional staff members. Whether it's lunch ladies giving free and reduced meals, school resourse officers, or guidance couselers, they all work hard so I can focus on classroom instruction. So as long as families and communities fail to provide all that students need, this new teacher will spend my constrained work hours focusing on the top two parts (esteem and learning) of Maslow's pyramid, but be sure to keep an eye out for those who aren't there and introduce them to the right person.

Tuesday, September 22, 2009

Economics of Blog Post Frequency

Loyal friend and reader Justin recently asked me this:
Do you think more people read a blog post if you don't publish anything new for a few days after it?
This made me to think through what might influence the possibility of a particular post being read by people who are already regular readers. So like any good economist, I've tried to put it into an equation. The variables I've come up with are Quality of Post Title (T), Quality of First Sentences (F), Quality of Recent Posts (P), Length (L), Time Until Next Post (N) and the Number of Readers Not Using a Feed Aggregator (A). Here's the equation:
Likelihood of Being Read by Regular Readers = T + F + P - L + (N x A)
So to answer Justin's question, I think the timing of the next post does affect the probability that a post will be read, but only for readers who don't subscribe to the feed and just check the site every so often.

Monday, September 21, 2009

The Government Takes My Drugs

I've been a long time proponent of legalizing most drugs. Not because I personally will use them, but I don't want tell someone else they can't. Also, banning substances gives criminals an advantage over legitimate businesses (think Al Capone) and can actually increase the power and influence of gangs. However, the government has recently extended its grasp into my preference for drugs. Starting midnight tonight, it will be illegal to sell clove and other flavored cigarettes. That means me, and mostly teenage girls, won't be able to have a tasty smoke break. Granted I rarely smoke, but I will miss the option. Oddly enough, cigarette giant Philip-Morris actually supported the law stating publicly that they side with lawmakers on their desire to decrease teenage smoking. As you might have guessed, there's more to the story. Clove cigarettes mostly come from Indonesia and compete with domestic menthol cigarettes. It seems this law is protecting big tobacco more than it's protecting impressionable youth.

Saturday, September 19, 2009

Patience and Poverty

Whether in politics, economics or religion, poverty is an important issue. Why are some rich and others, who seemed to have similar opportunities, poor? We can probably agree the answer is some combination of genetics and socialization, but what else do we know? According to an experiment done in the 1960's, patience is an incredible predictor of academic and financial success. A group of 4 year olds were given the option to eat a marshmallow right away or, if they waited for a 15 minutes, they could have two. Here's a hilariously entertaining video of the experiment redone. Fifteen years later the research showed that children waited the full 15 minutes had an SAT score 210 points higher than the kid who only waited 30 seconds:



Not only is education effected, but the children who decided not to delay satisfaction had a higher average BMI and more problems with drugs. This explains why some people forgo a present job to invest in education to get a higher paying future one. Or why some people spend their paycheck instead of saving it with interest. Everyone has a different rate at which they discount the future. For children, the future is so far away that the present dominates almost all choices. One of the things that makes us adults is our ability to pass up immediate gratification for future security. Or is it? Are the children who couldn't wait for the second marshmallow worse off or were they just fulfilling their preferences? Surely at some point we would all stop waiting. Could this be applied to the poor who live paycheck to paycheck? If so, is there any solution that doesn't deal with this inherent lack of foresight. And finally, if these differences aren't 100% genetic, shouldn't we teach patience in school?

Tuesday, September 15, 2009

Economics of Therapy

For a long time I've thought most therapy can be replaced by a good set of friendships. Here's a conversation between two bloggers that reveals a flaw with that belief:
Penelope: Why are you not in therapy? It's so fun.

Ben: Because I can talk to you, Chris, etc.

Penelope: I am not your therapist, though. Friends are not therapists. Friends do give and take. You can just take from therapists. Which is why self-discovery goes so much faster in therapy. You should try it. You're so into experiences!
Friendships have a certain percentage give and take, unlike therapists who are equipped to just give, not counting the bill of course. So once again an economics question. If your productive enough to use your vocation to pay for your therapy, then go for it. If you're poorer, then your time is generally worth less and you'd probably rather use the longer, friendship route.

Also, there are plenty of examples where therapists' expertise exceeds the value of existing friendships. No matter how much I love someone, I don't feel equipped to counsel them through abuse, divorce, etc. However, there is one benefit you get from relational therapy that you can't get from professional:
Ben: To play devil's advocate, I sometimes find I learn things about myself when I'm giving advice to others. That is, during the "give."

Monday, September 14, 2009

John Stossel Moves to Fox News, Bummer

From his blog:
It's time for a change. In one month, I leave ABC News. In October, I will join the folks at Fox. I plan to do a one hour prime time show every week on FBN, the Fox Business Channel, and contribute to various existing programs on Fox News Channel.
This is not good news for independents who are dissatisfied with both parties' disregard for fiscal and Constitutional limitations. It seems he will have more quantity, but my guess is lower quality. And even if Stossel is able to stick to his guns, the reputation of Fox News will surely taint it. I'm a big fan of John Stossel, so I'll assume he knows what he's doing. If we're lucky, he may remind Republicans why people used to vote for them and why libertarians don't.

Saturday, September 12, 2009

Economics of "You Lie"

What are the economic benefits of yelling at the President?
Less than a day after Rep. Joe Wilson formally apologized to President Obama over his "you lie" outburst, a campaign aide confirms to CNN the South Carolina Republican has raised "more than $200,000″ in the wake of the now-infamous moment.
But what are the costs? So far his political opponent has raised $254,721.

Friday, September 11, 2009

Cost of September 11th

From British economist Tim Harford:
Reading the full range of studies, I have concluded that the direct physical effects of such a horrific attack had been smaller than most people expected. Perhaps $25bn of buildings were destroyed; the lifetime wages of the victims would have been about $10bn, which is a crude way of calculating the narrow economic impact of a mass murder. But beyond that, there seem to have been few immediate economic consequences for New York City. The additional costs to the country as a whole were largely psychological: job losses because of a loss of confidence, for instance. There is a reason such acts are called terrorism.
I wonder how much extra the ensuing regulation and bureaucracy has cost? Should we add the cost of the war in Iraq and Afghanistan as well? Can we at least add the benefit of the humorously comforting 9/11 issue of the Onion?

Thursday, September 10, 2009

Advertising Without Waste

One thing that has always bugged me about advertising is the use of real resources on un-consumable goods. All the hours of labor put into the production of a commercial could be spent creating something that actually has value. This is especially true when I see commercials that give customers no actual information about the product. However, recently I've seen example of advertising that actually produces something. On Labor Day many of us put on our favorite sports jersey and headed over to Chick-fil-A for a free chicken biscuit. Reader and fellow blogger Justin also pointed me to another 90% off (for 9/9/09) deal at Restaurant.com where I bought a hundred dollars worth of restaurant coupons for less than $4. Why would these profit driven companies give away so much? Word of mouth is the perfect way to remind people of your product and what better way to get people talking than by offering huge discounts. It will also increase your brands likability. Best of all, they didn't waste millions on advertising.

Wednesday, September 09, 2009

Live Free or Die...

I clearly like that quote. But I recently read what comes after it:
Live free or die: Death is not the worst of evils.
I've been thinking about the similarity in language between our founding fathers and modern day Middle Eastern terrorists. I believe terrorism in and of itself isn't evil, but it is the goal of the terrorist that matter. It's a scary thought, but I think there's something powerful in extremism.

Tuesday, September 08, 2009

Economics of Marriage

More good stuff from NPR's Econ Fun-01:
Most people think that if you let an economist into your personal life they'll tell you how to re-balance your portfolio. While that might be true, economists see markets at play everywhere. Even in your romantic life.

Indeed, I'm one of the worst guests that you can invite to your wedding. Why? Because while most of your guests are listening for your love story, I'm listening for your contract. While others see a romantic courtship leading to the altar, I see people who are satisfied enough to stop searching for someone else.

Economists simply can't believe in one soulmate. There are too many people in the world and the odds of finding that one person in five billion are, well, you can do the math.

So if economists don't believe in soulmates, why do we think people get married?

Searching for a spouse is very similar to searching for a job. There is not one perfect job for each of us, but there are clearly better and worse jobs. So we hunt, for a spouse and a job. When do we stop? When the offer in the hand is better than the likely offer in the bush.

At a wedding I see a relationship that is good enough to settle down and start investing in.

If you get a reasonable rate of return, investment in your relationship will make it truly better than any other relationship you could have. And that's why I listen to people's vows: to understand what they want out of their marriage or in economist-speak, what they are contracting over.

How important are fidelity, loyalty, generosity, kindness? As an economist I think that a good marriage, like a good employment relationship, has shared vision, common interests, complementary abilities, and gains from specialization.

If you want to hold on to romantic illusion, don't invite me to your ceremony. But if you do, please don't sit me next to your cousin in banking; we likely have less in common than you think.

It sounds crass, but there wasn't anything I don't agree with. More importantly, my wife agreed too. For those interested here's our earlier posted marital contact.

Sunday, September 06, 2009

Why I've Improved as a Teacher and Improviser

I posted earlier on why in the long run I will be a great teacher (because I like learning). Here's one reason why I think I've already improved:
we document that a teacher’s students have larger test score gains when their teacher experiences an improvement in the observable characteristics of her colleagues. Using within-school and within-teacher variation, we further show that a teacher’s students have larger test score gains when their teacher has more effective colleagues (based on their own students’ achievement gains from an out-of-sample pre-period). These spillovers are strongest for less experienced teachers, persist over time and teachers perform best when they are the weakest of their peer group– suggesting a peer learning interpretation. Consistent with this interpretation, conditioning on historical peer quality reduces the explanatory power of individual teacher effects by twenty percent.
Though my school is small and rural, there are experienced educators there that have pointed me in the right direction. Like the previous post, this can apply to my improv as well.

Saturday, September 05, 2009

Economics of Toilet Seat Etiquette

From English economist, Tim Harford:
It would be more efficient to leave the seat as you like it since you might be the next in.
Don't worry ladies, he's not done yet. He states that there's a bigger picture:
Economists are all about not what do you say but what do you do? And it's a very, very cheap signal that shows consideration for a man to leave the seat down. He's actually showing that he's considerate, he's a gentleman. And it's cheaper than flowers.

Freedom to Choose

Here's a great thought experiment on personal choice from the blog Meteuphoric. People regularly claim that selling organs is like stealing organs, sweatshops are like slavery, euthanasia is like murder, and [legal] prostitution is like abuse. However, the former is freely chosen and the latter is coerced. Even if the choice is not the one society prefers, it is the preference of the individual. Most importantly, those who want to prevent the first, must do so out of coercion of the second. I see this as a debate between competing freedoms. Some want the freedom to choose their individual preference and others want the freedom to live in a world without where that preference doesn't exist.

Here's an unrelated, but equally interesting post about whether we should care about the interests of people who could exist, but don't.

Friday, September 04, 2009

Inflation Explained on the Whiteboard

From the Marketplace blog, the Whiteboard:

Knowing when to pull money out of the system is a difficult decision for the Federal Reserve. I foresee some inflation in 2010 as markets return to normal. That's good for borrowers, but bad for savers. Here's another classic episode on the source of this problem, the credit crisis, as an Antarctic expedition.

Thursday, September 03, 2009

Tyler Cowen on Blogging

Marginal Revolution is on a small list of favorite things to read online. Here's an interview with one of the authors, along with others at the Economics Blogger Forum, on how he thinks about his own blog. Here's a money quote:
People have a tendency to approach issues and they want to apply simple good vs evil narratives, heroes vs villains. In my writing on the blog I deliberately try to subvert all of those expectations and to present points in some other way, and in some other emotional framing almost just to trick people or force them to think about things in a new way again. And that to me is more the mission of the blog. it's a very welcoming, inclusive approach. It's really about ideas and trying to open up horizons.
I find myself falling into this good vs. bad reality too. Hopefully I can avoid that and focus on presenting and creating original ideas.

Wednesday, September 02, 2009

Economics of Life

One really good snippet from this NPR interview with economist by trade and runner by hobby, Justin Wolfers:
do what you love and pay for it by doing what your good at

Tuesday, September 01, 2009

One Point for Nature Over Nuture

Most of the discussion about inequality deals with the impact of an individual's environment, which is of course very important. However, in a paper entitled What Happens When We Randomly Assign Children to Families? the author studies an adoption agency that places a random set of Korean children in American homes. Then after 30 years they compared the incomes of the adopted children and the biological children with parental income. Here are the conclusions:
Having a college educated mother increases an adoptee's probability of graduating from college by 7 percentage points, but raises a biological child's probability of graduating from college by 26 percentage points. In contrast, transmission of drinking and smoking behavior from parents to children is as strong for adoptees as for non-adoptees. For height, obesity, and income, transmission coefficients are significantly higher for non-adoptees than for adoptees.
Here's more from Tyler Cowen, who apparently has access to the whole paper.