kottke.org posts about economics
Crime in the three biggest American cities (NY, Chicago, LA) is down…and up almost everywhere else. In part, this is due to the aging of the population in those cities. “Together they lost more than 200,000 15-to 24-year-olds between 2000 and 2005. That bodes ill for their creativity and future competitiveness, but it is good news for the police. Young people are not just more likely to commit crimes. Thanks to their habit of walking around at night and their taste for portable electronic gizmos, they are also more likely to become its targets.” Young people, your gizmos are hurting America!
Adding sushi to the ever-growing list of everyday consumables as economic indicators: steak, Big Macs, Starbucks coffee, Coca-Cola, and cigarettes.
Are the USPS’s “forever” stamps a good deal for the consumer? “Absolutely not.” Stamp prices increase more slowly than the inflation rate so stamps are continually getting cheaper.
The price of a bottle of Coca-Cola remained a nickel for more than 70 years, until 1959. “The price of sugar tripled after World War I before falling back somewhat; over the past six decades, the price of coffee has gone up eightfold. Coke itself was taxed first as a medicine, then as a soft drink, and survived sugar rationing. All the while, the price stayed at a nickel.”
Stephen Dubner and Steven Levitt (aka the Freakonomics guys) on the first-world phenomenon of doing menial labor as a hobby. Examples: knitting, cooking, gardening, lawn care. More on the Freakonomics site.
Graphs of the US minimum wage from 1938 to the present. If you take inflation into account, it’s been falling pretty steadily since 1968. But also note that number of people directly affected by the minimum wage has declined as well to just over 2% of workers. (via rb)
Compared with Snapple, whiteout, and Pepto Bismol ($123.20/gallon), gasoline is surprisingly inexpensive. “$21.19 for WATER - and the buyers don’t even know the source. No wonder Evian spelled backwards is Naive.”
Update: Rob Cockerham did a more extensive analysis of liquid pricing a few years ago.
In a money game with anonymous rich and poor players, rich players will give up some money to help the poor but poor people are more likely to spend their money to make the rich players less rich. Reminds me of the ultimatum game in which people reject free money when they feel like they’re getting a raw deal in comparison to someone else.
Short interview by James Surowiecki of Nassim Taleb about his new book, The Black Swan. “History is dominated not by the predictable but by the highly improbable — disruptive, unforeseeable events that Taleb calls Black Swans. The effects of wars, market crashes, and radical technological innovations are magnified precisely because they confound our expectations of the universe as an orderly place.” Malcolm Gladwell wrote an article on Taleb for the New Yorker in 2002, which Taleb said “put too much emphasis on the far less interesting, more limited — and rather boring — applications of my ideas to finance/economic, & less on the dynamics of historical events/philosophy of history, artistic success, and general uncertainty in society”. See also an interview in New Scientist, a NY Times op-ed, and a long piece on the Edge site about the black swan idea.
People cruising the streets for parking meters do so because meter pricing is too low. “Underpriced curb spaces are like rent-controlled apartments: hard to find and, once you do, crazy to give up. This increases the time costs (and therefore the congestion and pollution costs) of cruising.”
Ben Stein on “what’s new and hot and exciting” in the world on money: “The most sought after jobs in the United States now are jobs in finance in which basically almost no money is raised for new steel mills or coal mines, but immense sums are raised to buy companies, recapitalize them — which means pay the new owners immense special dividends and other payments for going to the trouble of taking over the company. This process results in fantastically well-paid investment bankers and private equity ‘financial engineers’ and has no measurably beneficial effect on the economy generally. It does facilitate the making of ever younger millionaires and an ever more leveraged American corporate structure.”
Advertising Age reports (via gulfstream) that despite having spent as much as a reported $100 million on advertising and promotion, the (RED) campaign has raised only $18 million to fight AIDS in Africa. (RED) CEO Bobby Shriver responds by saying that the amount will soon be $25 million, they’re in it for the long haul, and that there are non-monetary benefits to all of the advertising — “A phenomenal benefit is that Gap, Apple, Sprint and other sales people are meeting Americans and explaining that 5,500 Africans dying daily of AIDS is preventable”.
The (RED) campaign strikes me as part of a larger trend in the US (and perhaps elsewhere too): the idea that if you, the consumer, spend normally (or even increase your spending), it is possible to break the law of conservation of energy and somehow save more money or lives. Other examples of the spend-to-save trend include the Discover Card Cashback Bonus program, the Bank of America Keep the Change program, and hundreds of retail promotions where, golly, if you spend another $20 on something you don’t need, you get a free something that you really don’t need.
It seems to me that if The Gap really cared about stopping HIV/AIDS in Africa, they would just donate the $7.8 million they spend on (RED) advertising to the Clinton Foundation. If Discover really cared about saving you money, they’d lower their APR to prime + 1.
I realize that the entire US economy is a house of cards kept standing by the escalation of spending and credit card debt by American consumers, but the sad fact is that to save money, you need to cut spending or increase income. And if you really want to help fight AIDS in Africa, instead of buying that (RED) Gap t-shirt for which Gap will donate 50% of its profit to The Global Fund, buy a cheaper one at American Apparel and send the $13 difference to the Global Fund yourself.
The WSJ reports on economist J.C. Bradbury’s new book The Baseball Economist, which sounds Moneyball-ariffic. Contrary to popular belief in “protection”, Bradbury found that “a weak on-deck hitter makes a batter more likely to get an extra-base hit”. Bradbury is also the author of the Sabernomics blog. (via biourbanist)
Joel Kotkin argues that the “superstar cities” (New York, LA, Chicago, Boston, San Francisco) are overrated and overpriced and that the real economic and social action in the US is happening in the more affordable cities (Charlotte, Houston, Las Vegas, Phoenix). This article contains a wealth of buzzwordy phrases…in addition to “superstar cities”, Kotkin refers to a “Bloombergian luxury product”, “trustafarians”, the “Vailization effect”, “neocon anti-urbanism”, and “Mayor Bloomberg’s luxury calculus”. (via biourbanist)
A paper by Linda Bilmes of Harvard’s John F. Kennedy School of Government concludes that in addition to the stated cost of the wars in Iraq and Afghanistan by the Bush administration, it will cost $350 - $700 billion for the US gov’t to provide health benefits and care over the lifetimes of soldiers who served there. More from the Christian Science Monitor. (thx, marcus)
Long audio interview with Michael Lewis by economist Russ Roberts on “the hidden economics of baseball and football”. “Michael Lewis talks about the economics of sports — the financial and decision-making side of baseball and football — using the insights from his bestselling books on baseball and football: Moneyball and The Blind Side. Along the way he discusses the implications of Moneyball for the movie business and other industries, the peculiar ways that Moneyball influenced the strategies of baseball teams, the corruption of college football, and the challenge and tragedy of kids who live on the streets with little education or prospects for success.”
David Pennock on the steep rise of Apple’s stock after announcing the iPhone: “Jobs’s speech could not possibly have revealed over $8 billion in previously undisclosed information”.
Update: On the other hand, analysts think that Steve Jobs’ mere presence at the company is worth $20 billion.
James Surowiecki discusses the waste of holiday giving. “Waldfogel’s main finding is that, in general, people spend a lot more on presents than they’re worth to those who receive them, a phenomenon that he calls ‘the deadweight loss of Christmas.’” This is one of my big problems with the whole Christmas thing. Related: gift cards worth billions of dollars are left unredeemed each year.
Muhammad Yunus, who came up with the idea of microcredit, received his Nobel Peace Prize yesterday. His Nobel lecture is available in text and video formats.
Although Nintendo finds itself in third place in the video game console wars behind Sony and Microsoft, the company is doing really well financially while Sony and MS are maybe breaking even with their efforts. “Nintendo knew that it could not compete with Microsoft and Sony in the quest to build the ultimate home-entertainment device. So it decided, with the Wii, to play a different game entirely.”
Tariffs on imported sugar and ethanol imposed by the US government keep our sugar expensive and is keeping the US from using more efficient methods of saving energy and, oh, by the way, helping the environment. This excerpt from the last two paragraphs of the piece is a succinct description of what’s wrong with contemporary American politics:
Tariffs and quotas are extremely hard to get rid of, once established, because they create a vicious circle of back-scratching-government largesse means that sugar producers get wealthy, giving them lots of cash to toss at members of Congress, who then have an incentive to insure that the largesse continues to flow. More important, protectionist rules flourish because the benefits are concentrated among a small number of easy-to-identify winners, while the costs are spread out across the entire population. It may be annoying to pay a few more cents for sugar or ethanol, but most of us are unlikely to lobby Congress about it.
Maybe we should, though. Our current policy is absurd even by Washington standards: Congress is paying billions in subsidies to get us to use more ethanol, while keeping in place tariffs and quotas that guarantee that we’ll use less. And while most of the time tariffs just mean higher prices and reduced competition, in the case of ethanol the negative effects are considerably greater, leaving us saddled with an inferior and less energy-efficient technology and as dependent as ever on oil-producing countries.
Maddening. Partisan politics is a not-very-elaborate smokescreen to distract us from this bullshit.
Surprising factoid from an article on legalizing kidney sales: “America already lets people buy babies from surrogate mothers, and the risk of dying from renting out your womb is six times higher than from selling your kidney”. (via mr)
There’s evidence that the dot com bubble wasn’t all that bad. A study found that “the attrition rate for dot-com companies was roughly 20% a year, which is no different from what occurred during many other industries, such as automobiles, during their early boom periods” and that the market could have supported more smaller niche companies during that time. Also of note: the Business Plan Archive “collects and preserves business plans and related planning documents from the Birth of the Dot Com Era so that future generations will be able to learn from this remarkable episode in the history of technology and entrepreneurship”.
Profile of economist Kevin Murphy, who none other than Steven Levitt calls “the smartest guy in the field”.
At PopTech a few weeks ago, Lester Brown, who has been a leading advocate of environmentally sustainable development for almost 30 years, spoke about the impact of the increasing production of ethanol. As more corn gets used for making automotive fuel, that reduces the amount of grain available for food production. As demand rises, so will the price…no matter what people are using the corn for, be it fuel or food. The countries that will really suffer in this scenario are those that import lots of grain for food.
When Brown said this, I immediately thought of Mexico. When you consider the food culture of Mexico, one of the first things to mind is corn. Corn (maize) was likely first domesticated in Mexico and remains the cornerstone of Mexican cuisine; in short, corn is far more Mexican than apple pie is American. In 1491, his excellent book on the pre-Columbian Americas, Charles Mann tells us that despite corn’s high status, Mexico is increasingly importing corn from the United States because it’s cheaper than local corn:
Modern hybrids are so productive that despite the distances involved US corporations can sell maize for less in Oaxaca than can [local farmer] Diaz Castellano. Landrace maize, he said, tastes better, but it is hard to find a way to make the quality pay off.
Those great tortillas you had at some local place while on vacation in Mexico? There’s an increasing chance they’re made from US corn. Mmm, globalizious! Of course, Mexican farmers are getting out of the farming business because they can’t compete with the heavily subsidized US corn and Mexico is losing control over one of their strongest cultural customs. Now that ethanol is changing the rules, there’s a bidding war brewing between Americans who want to fill their gas tanks and Mexicans who want to feed their children. Odds are the tanks stay fuller than the stomachs.
For reference, here’s what increasing ethanol production has done to the price of corn over the past three months:
And that’s despite a fantastic US corn harvest. The graph is from this article in the WSJ, which contains a quick overview of the effects that the growing ethanol industry might have.
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