Friday, September 23, 2011

Road Safety: What speed is prudent?

Alex Tabarrok has an interesting post on what makes highways dangerous:

The 55 mph speed limit was a vain attempt by the Federal government to reduce gasoline consumption; initially passed in the 1974 Emergency Highway Energy Conservation Act the law was relaxed in 1987 and finally repealed in 1995 allowing states to choose their speed limits. Highways and cars are safer today than in the 1970s and on many highways speed limits were increased to 65 mph. Higher speed limits are often safer because what is worse than speed is variable speed, some people driving fast and some driving slow. When the speed limit is set too low you get lots of people who safely break the law and a few law-abiders who make the roads more dangerous.

That's why life in the slow lane is not always the safe route. In the fast lane, I think this is precisely why Montana's old Reasonable and Prudent speed limit was dangerous (and eventually voted out).

After the federal repealing of the national speed limit law in 1995, Montana had 4 years of "Reasonable and Prudent" driving on the interstate. Growing up in Montana and turning 15 in 1997, I was one of the least reasonable and prudent people to drive on Montana Interstate highways. Because the 16-year-old version of me had a different idea than most of what constituted reasonable driving, I often passed people while going 20 mph faster than them (not proud of this). Although it was fun to Tony.16, in retrospect (from Tony.29's perspective), this didn't feel safe.

As a 17-year-old driver, I was happy when they imposed limits on everyone in 1999. Interestingly, one role for speed limits is to solve the coordination game of how fast we should drive. If everyone sees the same number, we (more or less) tend to drive the same speed (5-10-15 mph higher than that number). Except for when the number is absurdly low, but you should read the Tabarrok article for that.

Monday, September 19, 2011

What is in a name?

Apparently, Netflix -- or Qwikster -- thinks a lot (according to an e-mail I received this morning). Here is a key excerpt:

It’s hard to write this after over 10 years of mailing DVDs with pride, but we think it is necessary: In a few weeks, we will rename our DVD by mail service to “Qwikster”. We chose the name Qwikster because it refers to quick delivery. We will keep the name “Netflix” for streaming.

Qwikster will be the same website and DVD service that everyone is used to. It is just a new name, and DVD members will go to to access their DVD queues and choose movies. One improvement we will make at launch is to add a video games upgrade option, similar to our upgrade option for Blu-ray, for those who want to rent Wii, PS3 and Xbox 360 games. Members have been asking for video games for many years, but now that DVD by mail has its own team, we are finally getting it done. Other improvements will follow. A negative of the renaming and separation is that the and websites will not be integrated.

There are no pricing changes (we’re done with that!). If you subscribe to both services you will have two entries on your credit card statement, one for Qwikster and one for Netflix. The total will be the same as your current charges. We will let you know in a few weeks when the website is up and ready.

If people are angry with the fact that you raised prices (leaving the streaming service en masse), I am not sure it helps to change your name. Maybe I'm wrong, but I doubt this move will "regain trust."

Monday, September 12, 2011

Thoughts on Favoritism

This article from MSNBC made my news feed today:

A survey recently released by Georgetown University’s McDonough School of Business that polled senior executives at large U.S. corporations found:

92 percent have seen favoritism at play in employee promotions.
84 percent have seen it at their own companies.
23 percent said they practiced favoritism themselves.
29 percent said their most recent promotion considered only a single candidate.
56 percent said when more than one candidate was considered, they already knew who they wanted to promote before deliberations.
96 percent report promoting the pre-selected individual.

“This survey reminds us that favoritism remains alive and well in the executive suite. Many playing fields still aren’t level,” said Lamar Reinsch, a professor of management at Georgetown’s McDonough School of Business.

What do you think? Is this evidence of favoritism or just a really long interview?

Saturday, September 10, 2011

Hey, Macarena!

Continuing with the video theme, I love a good caption contest.

A lot of people seem to think that Geithner is doing the hand jive. I think he's between beats one and two of the Macarena.

Friday, September 9, 2011

Whispering to Donkeys

Let the silly campaign ads begin (HT: Conrad):

For a winning ad from 6 years ago, check this one out:

Thursday, September 8, 2011

Thumbs Up?

It has been a while since I reported on interesting trends in the data from my YouTube channel. One trend that caught my eye is that some videos receive many more ratings than others. I knew that my video on budget constraints had received the most ratings (183 positive ratings to date), but were there other videos that induced people to click that thumbs up button?

To find out, I looked at the ratings for all of my videos that have 5000 or more views (37 of them). Once you look at the data, it turns out that 5 videos have a lower view-per-positive-rating ratio than my budget constraint video. In case you're wondering what these videos are, here's the list with views per positive rating in parentheses:
  1. (78.91) Video 43: Pareto Efficiency and the Edgeworth Box.
  2. (81.23) Video 40: Normal Form Games
  3. (87.94) Video 44: The Coase Theorem and the Edgeworth Box.
  4. (99.38) Video 37: Basics of Edgeworth Box Economies.
  5. (99.40) Video 16: Compensating and Equivalent Variation.
It is interesting that my endowment economy videos have done so well compared with the others on my channel. The average views-per-positive-rating among videos of mine that have 5000 views ore more on my channel is 205.62. By this measure, these videos are more than twice as "good" as the average "popular" video on my channel.

Monday, September 5, 2011

On Labor (on Labor Day)

In honor of Labor Day, here is my version of the textbook discussion of the labor-leisure tradeoff. The most standard operating assumption is that time at work is a bad while time off work (Leisure) is a good. Why spend time at work? Because getting paid allows you to consume stuff you like, of course! In other words, we can describe the labor-leisure tradeoff by assuming that there are two goods: Consumption and Leisure.

For a guy who makes $10/hour and has 24 hours in a day, the leisure-consumption budget constraint connects the points (24 hours, $0) to (0 hours, $240). A utility-maximizing worker might pick a point like (16, $80). As we see in standard microeconomics, the graph looks like this:

Of course, the world is more complicated than this picture (even for hourly workers who have absolute discretion about how many hours they work per day; an implicit assumption we are making here). A simple modification is to introduce time-and-a-half overtime for workers who work more than 8 hours / day.

In this event, (24 hours, $0) is still affordable; So is (16 hours, $80). But, the budget constraint becomes steeper at (16, $80). The simplest way to see this is to imagine how much consumption the worker could afford if he spent all 24 hours working. The first 8 hours nets $80 (10*8); the next 16 hours nets $240 (15*16). Hence, the new graph would look like this:

For a worker like the one I have depicted in this post (someone who optimally chooses 8 hours of work), time-and-a-half overtime will unambiguously lead the worker to work more. In this example, it is also unambiguous that the worker will have greater utility.

There is a lot more to the labor-leisure tradeoff, but this is a fun starting point and an interesting model.

Thursday, September 1, 2011

Warnings and Precautions

Casey Mulligan gives an excellent account of the power of the market, time and human ingenuity to avert disaster:
I have no expertise in climate, weather, physics or aerodynamics, but one of the lessons of economics that environmental changes are less harmful when they can be anticipated. With only a few days of preparation, as with Hurricane Irene, people and mobile capital can be moved out of harm’s way. Protective barriers can be constructed for the immobile capital like homes.

New York was not given a definite warning of Irene a year ahead, let alone a decade ahead. But if it had been warned years ahead, the economy could have adjusted even more by making plans to locate activity in more protected places. Or perhaps even to invent goods and production processes that are more hurricane resistant.

The opportunities for preparation are one reason why economists expect the damage from global warming to be different, and perhaps less, than from natural disasters that hit by surprise.