Thursday, December 30, 2010
Wrong. I love it -- and whenever I am in charge of a principles microeconomics class -- I will seriously consider assigning it as required reading.
What I love most about the book is that there are no paragraphs or lines. Each page is a canvas and the book fills that canvas with an engaging story about microeconomics. This story is told through pictures.... and we all know that a picture tells a thousand words. Reading introductory economics in this format is a liberating experience. Even better, using cartoons to lure students into the study of economics is one of the greatest head fakes of all time. You read it because it is fun, but you end up learning economics along the way.
The graphic content does a tremendous job of bringing out complex concepts. One of my favorite illustrations of the power of this format is the introduction to Chapter 8, which is about simultaneous-move games. (Forgive my coercion into text. It works better in picture form. You can see for yourself for only $12.21 plus S+H... as of 12/30/10, prices may adjust to market conditions. When you get the book, turn to page 89.).
The cartoon features two characters who were introduced earlier in the book: Ooga (smart cave woman) and Mog (less smart Neanderthal). The two are about to play a game of Rock-Paper-Scissors. Ooga is apparently teaching Mog how to play. Mog says "Ok, Ooga, Mog understand rules. Ready? 1... 2... 3..." And, the next panel says "ROCK!" "paper." You can guess who said what.
This illustration is rich with information (and it is just one example in the book). Very few words are needed to convey a whole paragraph of ideas. And, not only does the reader understand that rock-paper-scissors is an example of a simultaneous-move game, but there's an insightful hint that the simultaneity might be a problem if you take the game too seriously. That said, the reader is willing to suspend his disbelief long enough to be tricked into understanding how simultaneous-move games work.
I received it as a gift, but after the fact, I would have happily paid for it. And, at a price of $12.21, I wonder how many "high school or college instructors" would have the gall to request an exam copy (price of $3). Not me.
Tuesday, December 28, 2010
A good longer answer is available at this link from Livestrong:
Monday, December 27, 2010
Not so with a “right” to “basic health care.” Elevating free access to a scarce good into a “right” imposes on strangers all manner of ill-defined positive obligations – obligations that necessarily violate other, proper rights. For example, perhaps my “right” to basic health care means that I can force Dr. Pies away from his worship service in order that he attend (free of charge!) to my ruptured spleen. Or perhaps it means that I have the “right” to pay for my health care by confiscating part of his income. If so, how much of his income does my “right” entitle me to confiscate? Who knows?Boudreaux frequently writes letters to newspapers to correct the often wayward economic logic in their columns. Most of his letters are good, but this one stuck with me. Click through to read the entire letter.
Friday, December 24, 2010
Thursday, December 23, 2010
My biggest regret about the video is the fact that my shirt is at least a size too big (and, as a result, it looks very wrinkly). To see why my shirt is too big, check out this previous post. Here's hoping Santa brings me smaller shirts for Christmas.
Subjects were given a sugar pill. They were told it was a sugar pill. They were told that sugar pills are not medicine. And yet they had better outcomes than the control group who were not treated at all.Click through to read more about the study he describes. Here's an interesting quote from the article that Ely links:
This isn’t entirely new. In 1965, Lee Park and Lino Covi asked 15 neurotic patients at a psychiatric clinic if they wanted to try a sugar pill that could help them, even though it had no actual medicine. The patients agreed and the pills helped to reduce their symptoms. Kaptchuk’s trials extends upon that historical study by adding a control group.And, this:
Ernst isn’t convinced. He says, “The effect size is probably too small to be clinically relevant. [It] is unlikely to be of practical use.” To him, the results are interesting “mostly from a theoretical point of view”. But Kaptchuk thinks that the effect he saw is “clinically meaningful”, and comparable to some drugs being tested for IBS such as alosetron.
Tuesday, December 21, 2010
Mobile networks like AT&T and Verizon Wireless would be able to shut off your access to content or applications for any reason. For instance, Verizon could prevent you from accessing Google Maps on your phone, forcing you to use their own mapping program, Verizon Navigator, even if it costs money to use and isn't nearly as good. Or a mobile provider with a political agenda could prevent you from downloading an app that connects you with the Obama campaign (or, for that matter, a Tea Party group in your area).Franken makes an important point, but I am not sure that providers like Verizon would take extreme measures in metering customers on the margin. Limiting what customers can do with the network would reduce the amount of consumer surplus that consumers would get from access to the network. This would, in turn, reduce the amount that Verizon could charge for access. Hence, even though providers want to charge for their own services, they would face a tradeoff if they wanted to shut down the most valuable competing services.
This doesn't perfectly solve the problem of net non-neutrality in the absence of FCC regulation (services that use a lot of network resources -- i.e., streaming video -- would probably be the first targeted for charges), but it suggests that the problem is not as bad as the worst case scenario that people envision.
In case you are wondering, the FCC rules look like a compromise between pure net neutrality and allowing some control of network use on the margin. Especially among net neutrality purists, this has led to some concern:
The companies have said the rules would provide some regulatory certainty. In private, they have acknowledged the proposal could have been much worse. If approved, they “will give some assurances to the companies that are building Web applications — companies like Netflix, Skype and Google — that they will get even treatment on broadband networks,” Ms. Arbogast said.
But a wide swath of public interest groups have lambasted the proposal as “fake net neutrality” and said it was rife with loopholes. One group, Public Knowledge, said that instead of providing clear protections, the F.C.C. “created a vague and shifting landscape open to interpretation. Consumers deserved better.”
Notably, the rules are watered down for wireless Net providers like AT&T and Verizon, which would be prohibited from blocking Web sites, but not from blocking applications or services unless those applications directly compete with providers’ voice and video products, like Skype.
Monday, December 20, 2010
The first two and a half minutes are on net neutrality, and being someone whose livelihood stems from free-at-the-margin internet, he has an interesting perspective.
*Note: Obsession with images like this one is one thing that drives me crazy (maybe just about YouTube culture). It reminds me of my high school Boys State experience when I spent a week as a part of a mock state legislature. I went into this experience hoping to learn about the political process and I had the expectation that the guys who sounded the most sincere or persuasive would "win office." It turned out that the boys who put up the most pictures of Britney Spears were most likely to win office.
**Update: The video snapshot was changed since I originally posted this. It used to be a seductive picture. Now, it is more appropriate (a kid who looks upset). Beware. He might change it again.
In the current system, strictly speaking, your eligibility to deduct a charitable contribution doesn’t depend on whether you have a big mortgage. But it might as well. You can deduct charitable contributions only if you itemize rather than take the standard deduction, and the most common way a household collects enough deductions to make itemizing worthwhile is to have a big mortgage. (Living in a high-tax city like New York can also help a taxpayer cross that threshold, because state and local taxes are deductible, at least for now.)Here is Greg Mankiw in response to Thaler's column:
But I challenge anyone to justify a system in which we essentially subsidize contributions made by people with big mortgages. For one thing, this set-up magnifies the already large distortion created by the mortgage interest subsidy, since having a mortgage qualifies taxpayers for other subsidies as well.
I think there is a bit more logic to current policy than Thaler does. Suppose you believe, as I do, that consumption is a better tax base than is income. Then, starting with a measurement of income, it makes sense to allow deductions for "non-consumed income"--specifically, saving such as IRA and 401k contributions and charitable giving.All of this begs the question: Why start with a measure of income rather than consumption? If it is better to tax consumption, why not just tax consumption? Initially, it might have been easier to tax income (by deducting the money from the paycheck), but that's not so clear now.
One caveat: In practice, we shouldn't tax consumption directly unless we want both consumption and income taxes. We already have a bureaucracy devoted to the collection (and verification) of income taxes, and I suspect those bureaucrats like their jobs. In this case, the income tax bureaucracy is a concentrated interest group with all the incentive in the world to stick around. This fact would make it tricky to switch to consumption taxes while guaranteeing the elimination of income taxes.*
*All of this presumes that consumption is the right base. To the extent that there is disagreement about this premise, it would be even more difficult to come up with a coherent policy.
Saturday, December 18, 2010
A German company has begun building gold vending machines:
In other news, the wealth gap is especially apparent this Christmas. According to this article, high-end retailers are doing well while low-end retailers are doing poorly.
For those of you turning green with jealousy of the wealthy, the article has a nice quote for you too.
Among shoppers with a college education, for example, the unemployment rate is about 5 percent; for those without a high school diploma, it's 16 percent. Wages for upper-income consumers are rising; for those at the bottom, they're falling. The average bonus on Wall Street could top last year's level -- both because profits are up and because there are fewers bankers and brokers left with jobs to split the bonus pot.
That gap is showing up in the bottom lines of American retailers, some of which generate as much as half their annual profits from the holiday season. Though retail sales are expected to show healthy gains of 4 to 5 percent this year, retailers who cater to households at the bottom of the economic ladder are seeing very different results as their customers struggle to make ends meet.Global discounter Wal-Mart posted lower revenue at its U.S. stores in the third quarter as fewer customers turned out, and those who did spent less. (Overall profits were higher, the company said, thanks to cost-cutting and booming sales overseas.)
"The more high-end you go, the less promotional it's been," said McGranahan. "The real high-end guys -- the Burberrys of the world -- they don't have any inventory. Business has been so good, they've actually had to shut down some of the stores some days because they didn't have anything left to sell."That is, the wealthy are doing well this Christmas, but at least they're paying full price.
Wednesday, December 15, 2010
In my last update, I said how actively tracking my weight in a spreadsheet has been useful for me. For you data mongers out there, here's a plot of my weights over the last few months.
Because weights bounce around a lot by day, I used a scatterplot to group my recorded weights by week. I think it provides a nice picture of how the diet has gone.
To deal with the daily volatility of weights, I have also been tracking something I call my "smoothed weight," which is the average of my last five recorded weights. Here's that plot:
One thing to note: I hard coded my goal of 190 into these plots. Just like the time countdown on the elliptical machine, this gives me more motivation to keep working at it. When I record my weights, I am forced to recognize that I have plenty more to accomplish. For whatever reason, it works to keep me motivated.
I like the numbers, but a more important summary of my progress has been captured on my YouTube channel. Here are three screen captures (of me from the same unflattering camera angle) from videos I recorded during the course of my weight loss regimen.
Finally, Ian Ayres public (and financial) commitment to stay under 185 lbs seems to be going well (even past Thanksgiving). His Twitter weight has held steady.
Tuesday, December 14, 2010
Facebook, Buzz, Reader, and other social networking sites all have one thing in common: if you like something then you get to like it. But you never get to dislike what you dislike. (Sure you can unlike what you previously liked, but just as with that other interest rate you are constrained by the zero lower bound. You can’t go negative.)
This kind of system seems to pander to people such as me who obsessively count likes (and twitter followers, and google reader subscribers and…) because for people like us even a single dislike would be devastating. With only positive feedback possible we are spared the bad news.
It is entertaining to see him uncover some economics of the *like* button. Basically, because we are busy and it takes time to hit the like button and to comment, hitting *like* actually means something. Those who hit *like* are actually saying that they *really like* the status or post.
Controversial/offensive YouTube videos frequently get a mix of likes and dislikes. Both of those videos that I linked had over 100 dislikes (but also over 1000 likes) and you can see why some people would like or dislike those videos. They're provocative, and before you know it, you've watched the whole thing. Whether you liked it or not, you are prone to rate it after you watched the whole video.
My YouTube video tutorials tell a different story -- they rarely generate dislikes. At the time of this post, my most *liked* video has 74 likes (and no dislikes). My most *disliked* video has 2 dislikes, but it has 40 likes.* From the comments on that video, I can identify the two dislikes. One was for too much math, and one for the camera being shaky (and me skipping some algebra). I fixed the shakiness issue with a tripod.
Why does my channel get so few dislikes? If you dislike my videos, you're not going to watch the whole thing. You may watch a minute of it before you leave to something else, but you will be (at most) mildly offended by my video when you leave. Given that it takes some mental energy (and time) to dislike, the fact that most people who don't like my videos are only mildly offended means that my videos get few formal dislikes.
In other words, if someone dislikes my video, they must *really* dislike it. This is Ely's it-costs-to-like argument, but applied to dislikes. Hence, if a video on YouTube has 40 likes and 2 dislikes, all we can infer is that 40 people *really liked* it and 2 people *really disliked* it. But, there's no way to infer the true fraction of people who like or dislike the video (because there are people who have an opinion, but didn't bother to register it).
Then again, these omitted ratings close to indifferent anyway. If they chose not to vote, they must not want me to know how they feel. Selective ignorance is bliss.
*I think this is my most disliked video. I haven't found a good way to get YouTube to compare the dislikes and likes across videos.
Friday, December 10, 2010
In this post, I discuss how the "Hot Spots" analytic can give some useful feedback that would never be available in the regular classroom setting. The best way to understand "Hot Spots" is to see an example. Here's a snapshot of this "Hot Spots" analytic for a video of mine on the relationship between consumer theory and producer theory.
Some of my other videos demonstrate this flip side a little better. For example, this video on relating short run and long run average cost curves ranks among my least engaging. In fairness, I recorded it at around 11:30 pm:
Hot Spots can be a great source of feedback for instructors. What do students find most engaging? Where do I confuse students enough that they have to skip back to hear it again? When do I confuse people enough that they just give up? Do some visuals grab more attention than others?
Looking across videos, I can also ask whether my performance has improved over time. There's a lot of noise in the data, but here is one of my more recent videos (on price discrimination) that has enough data for YouTube to display the "Hot Spots" metric:
Attention is higher on average than my previous videos, which I take to be a good thing. Maybe I am improving. Then again, maybe by video 32, I'm down to the very few people who really want to learn about price discrimination.
Nevertheless, it is interesting to see the points of highest attention. Attention is especially high when I explain the "monopolist's tradeoff" at the beginning of the video (that's the first hump). When I explain the different requirements for price discrimination, the video loses a few people. Later in the video, attention rises again when I explain first-degree price discrimination (that's the beginning of the second hump).
In an actual classroom, I have never had such precise feedback. Using the metric of "glazed over eyes" can only communicate so much. In person, it is often a guessing game to figure out what aspects of an explanation were engaging and useful. Online, Hot Spots takes a lot of this guesswork out of the equation. That can be really useful.
Even though it has these useful analytics, I still don't believe that YouTube can replace the classroom. Teaching is about communicating complex ideas, and even with the introduction of low-cost video technology, the ability to ask and answer questions in real time (and to benefit from others' questions) means that a live classroom is always going to have an important place in education. That said, video supplements should play a more important role in future education. The technology is too powerful to go unexploited.
Wednesday, December 8, 2010
The phenomenon of “topping off” illustrates how higher-income people derive more value from various types of government spending than low-income people do. High-income people seem to value pensions, which is why they “top off” Social Security: they accumulate pensions above and beyond what the government forces them to accumulate though the Social Security system. You might say that pensions are easy to accumulate when your income is high — and that’s the point.
Low-income people, on the other hand, often accumulate no pension beyond what Social Security forces them to accumulate.
This excerpt might be a little mysterious. After all, what is "topping off" and why does Mulligan state that this phenomenon means Social Security is less harmful to wealthy individuals? Here's my explanation in the context of a contrived example.
Imagine a world where $20,000 is enough to have an average quality life in retirement. In this world, suppose that the following facts are true:
- A wealthy individual would like to save $30,000 for his golden years.
- A poor individual would like to save $10,000 for his golden years.
- You are either wealthy or poor and half of people are poor.
- There are no interest rates, there is no inflation and no one dies until after retirement (to make life simple).
At some point, the government notices a disturbing trend: half of individuals in society have below average quality of life in retirement. From a policy perspective, this simply won't do.
The government concludes that poor people have problems saving money for retirement. They claim the poor suffer from lack of foresight. For this reason, the government institutes a "Social Security" program, where each individual is taxed during his working years enough to guarantee an average quality of life in retirement (in our example, $20,000).
This program acts like a forced savings regime. Over the course of each worker's career, the government collects $20,000. Upon retirement, everyone receives the money the government saved on their behalf, which they use for retirement consumption. Individuals cannot use the government savings to pay down debt.
For the wealthy, retirement consumption is unaffected. They want more than the government is forcing them to save. Hence, wealthy individuals top off their retirement fund by contributing an extra $10,000 to a private savings plan. If there are zero collection costs,* Social Security of this form neither helps nor hurts the wealthy.
For the poor, retirement consumption may be different under the program. If the poor cannot use the government savings to pay down debt, the poor would be forced to consume $20,000 in retirement instead of the $10,000 they would have chosen in absence of the policy. For the government to force $10,000 more savings in retirement for poor people, they must induce poor people to spend $10,000 less during their working years.
Poor people don't top off their retirement savings precisely because the program distorts their consumption. This contrived program of "Social Security" makes poor individuals worse off, while not affecting wealthy individuals.
The system I described is not technically how Social Security works in the United States (that's why I called it "Social Security" above). In my example, the government was forcing retirement savings. In the real world, the current working population pays taxes that support the current retired population (who received a promise of retirement benefits during their working years). That caveat aside, there may be something to this intuitive idea of topping off.
One final note: My example is not an adequate description of how economists think about the overall desirability of Social Security programs. If you are interested, the right way to think about Social Security in the real world is to think about the savings decisions in an "overlapping generations" setting. In short, you get different results on the desirability and optimal form of Social Security depending on how quickly the population grows (or shrinks), how per capita wealth grows over time, how interest rates evolve over time and what is the appropriate interest rate to use for discounting.
*I am assuming income taxes for this "Social Security" program do not discourage working and the government can collect and distribute these taxes at zero cost. Relaxing each of these assumptions would create a cost of the program that would make it less desirable to enact.
Monday, December 6, 2010
She will soon begin charging for use. I advise her to hire a good consultant because pricing The Sun is not your run-of-the-mill profit maximization exercise. First of all, The Sun is a public good. No individual Earthling’s willingness to pay incorporates the total social value created by his purchase. So it’s going to be hard to capitalize on the true market value of your product even if you could get 100% market share.
Even worse, its a non-excludable public good. Which means you have to cope with a massive free-rider problem. As long as one of us pays for it, you turn it on, we all get to use it. So if you just set a price for The Sun, forget about market share, at most your gonna sell to just one of us.
Of course, all of this analysis presumes the ability to turn off the Sun. The woman -- even as owner of the Sun -- won't be able to do that (I hope). Ely's post points out that the woman would face problems collecting revenue even with a superhuman ability to extinguish light from Earth.
You may wonder why this woman decided to own the Sun. Here's her reasoning:
It is time to start doing things the right way, if there is an idea for how to generate income and improve the economy and people's well-being, why not do it?
She's misguided, but at least she's benevolent. I wonder how benevolent she'll sound when she needs to threaten to extinguish the Sun.
Friday, December 3, 2010
Some bowl supporters claim that the current system is good for college football because it makes the regular season more relevant for the top teams. One loss and you're out of contention for the national title. At the very top (as long as you have no losses thus far), that might be true, but what happens once a good team loses a game? Is the regular season as important as it was anymore? When the competition is tough, it's not so clear to me.
And, then there's the team that hasn't lost, but because it doesn't play in the toughest conference, it isn't ranked among the top two. Do they deserve to be in the top two at the end of the regular season? Probably not. But, do they deserve to have a chance to play one of those "best" two? I think so. Such a game would attract a lot of media attention. Finally, what about the regular season drama for the teams that have to go undefeated just to be noticed? Is that drama gone if we expand the playoff? Not if the playoff tournament is small enough.
The way I see it, there's plenty of drama and regular season pressure to go around in a 6-team format. To show what my tournament would look like, I redrafted my 6-team bracket from last year to incorporate the top 6 teams in the BCS standings.
Here's what my bracket looks like:
Wouldn't this be interesting? I especially like the first-round matchup between the "little sister" TCU and Ohio State. I would definitely watch that game .... if it actually mattered who emerged victorious.
At least, there is still the Division I Football Championship Subdivision where there is an exciting 20-team championship tournament to determine the national champion. That why, instead of watching some silly conference championship game, I'll be watching some football playoffs this Saturday.*
*I will just watch the highlights of the SEC championship game to find out who won (so I know whether I need to update my hypothetical bracket).
Thursday, December 2, 2010
At the end, you’ll also find my invitation to help deliver an appropriate prize to the winner of the 2010 Ruffin and Gregory Award for the Worst Treatment of Climate Change in an Economics Textbook. The traditional prize—as established with Ruffin and Gregory’s book, which is now selling for $0.55 on Amazon—is for the book in question to be hounded out of print.When I first read the report, I asked myself if this is how a general introductory textbook in microeconomics should be measured. After mulling this over, I am still not sure how much weight I should give his signal of quality.
On one hand, climate change is one example among many that a general microeconomics textbook should discuss. Judging the quality of a textbook by its treatment of one topic is imprecise, which is a liability, especially if you use the judgment to "hound [the book] out of print." Ideally, a textbook consumer (read "instructor") should take other factors into account. How strong is the book in relation to the instructor's course objectives? Will students read it? If there are errors/ weaknesses, can the instructor minimize these by offering supplemental material?
On the other hand, bias in the treatment of climate change may reflect an overall weakness on other important topics. Every textbook has its weaknesses, but some have more important weaknesses. Because it is costly to determine if a textbook is worth using, an informative signal (narrow as it may be) can be useful. How useful is this signal? Do textbooks that are weak on climate change have more significant weaknesses in other areas? How strong is this relationship?
I am uncertain about what to do with Bauman's review. There's information in what he writes, and I'll certainly take something away from it, but I don't come away from the report confident enough to help hound a book out of print.