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The Russian/Georgian conflict has proven the McDonald’s theory of war wrong. The theory stated that no two countries with McDonald’s restaurants would ever go to war with each other. (via mr)
Update: Depending on what you consider a war, the theory has been proven incorrect before. (thx, lots of folks who sent this in)
This is a stunning moment in economic history: At one time we worked hard so that someday we (or our children) wouldn’t have to. Today, the more we earn, the more we work, since the opportunity cost of not working is all the greater (and since the higher we go, the more relatively deprived we feel).
In other words, when we get a raise, instead of using that hard-won money to buy “the good life,” we feel even more pressure to work since the shadow costs of not working are all the greater.
The increasing income inequality in the US is partially to blame, says Conley. Those in the middle and upper middle classes are working harder and longer, trying to keep up with the Joneses who are growing more wealthy at an even faster pace. Conley’s got a book coming out in January on the same topic called Elsewhere, USA. (via ah)
This short NY Times profile of economist David Galenson reminded me that I never shared Old Masters and Young Geniuses with you. The book was recommended to me by Malcolm Gladwell — which means that many of you can now form your opinion of it without even reading it — through a talk that he gave a couple of years ago. Gladwell also wrote an article for the New Yorker about Galenson’s work but it was rejected:
When Mr. Gladwell submitted an article about Mr. Galenson’s ideas to The New Yorker, he suffered his first rejection from the magazine. “You buy this Galenson stuff?” Mr. Gladwell recalled his editor saying to him. “What are you, crazy?”
But never mind all that, Old Masters and Young Geniuses is one of the most interesting books I’ve read in the past few years. I haven’t studied enough art history to know if Galenson’s thesis is correct, but the book presents an interesting framework for thinking about innovation and how to best harness your own creativity.
The main idea is this. Instead of people being super creative when they’re young and getting less so with age (i.e. the conventional wisdom), Galenson says that artists fall into two general categories:
1) The conceptual innovators who peak creatively early in life. They have firm ideas about what they want to accomplish and then do so, with certainty. Pablo Picasso is the archetype here; others include T.S. Eliot, F. Scott Fitzgerald, and Orson Wells. Picasso said, “I don’t seek, I find.”
2) The experimental innovators who peak later in life. They create through the painstaking process of doing, making incremental improvements to their art until they’re capable of real masterpiece. Cezanne is Galenson’s main example of an experimental innovator; others include Frank Lloyd Wright, Mark Twain, and Jackson Pollock. Cezanne remarked, “I seek in painting.”
Galenson demonstrates these differences through analysis of how often artists’ works are reproduced in textbooks, auction prices, and museum shows. The pattern is clear, although the method is less than precise in some cases and Galenson has since backed off his thesis somewhat. But the compelling part of the book is what the artists themselves say about how they work. The text is littered with quotes from painters, poets, writers, sculptors, and movie directors about how they perceived their own work and the work of their peers and predecessors. Their thoughts provide ways for contemporary creators to think about how their creativity manifests itself.
The transcript of Gladwell’s talk is a good introduction to there ideas. Galenson’s next book, And Now for Something Completely Different, appears to be available online in its entirety in a preliminary form. Much more information is available on his web site.
How a rough system of barter developed into a more complex system of trade in WWII POW camps. This is fascinating stuff.
We reached a transit camp in Italy about a fortnight after capture and received 1/4 of a Red Cross food parcel each a week later. At once exchanges, already established, multiplied in volume. Starting with simple direct barter, such as a non-smoker giving a smoker friend his cigarette issue in exchange for a chocolate ration, more complex exchanges soon became an accepted custom. Stories circulated of a padre who started off round the camp with a tin of cheese and five cigarettes and returned to his bed with a complete parcel in addition to his original cheese and cigarettes; the market was not yet perfect. Within a week or two, as the volume of trade grew, rough scales of exchange values came into existence. Sikhs, who had at first exchanged tinned beef for practically any other foodstuff, began to insist on jam and margarine. It was realized that a tin of jam was worth 1/2 lb. of margarine plus something else; that a cigarette issue was worth several chocolates issues, and a tin of diced carrots was worth practically nothing.
The cigarette soon became the coin of the realm and at camps with stable populations, there were shops operated by the senior British officer with cigarettes as the currency people used to buy and sell goods to/from the store.
One trader in food and cigarettes, operating in a period of dearth, enjoyed a high reputation. His capital, carefully saved, was originally about 50 cigarettes, with which he bought rations on issue days and held them until the price rose just before the next issue. He also picked up a little by arbitrage; several times a day he visited every Exchange or Mart notice board and took advantage of every discrepancy between prices of goods offered and wanted. His knowledge of prices, markets and names of those who had received cigarette parcels was phenomenal. By these means he kept himself smoking steadily - his profits - while his capital remained intact.
The article also discusses deflation, the shifting availability of currency, credit, price movements, futures markets, paper currency, and price fixing. (via migurski)
A list of fifty things being blamed on rising oil prices. Among them: pizza deliviery prices, weakened demand for wine, “gas rage”, and more foot patrol for police officers.
One of my friends proposed a theory I find compelling: Our cultural consumption exists on a spectrum from “individual” to “collective”. Technology has shifted the balance for both books and music. Digital distrbitution and the iPod have made music consumption much more individualistic, while the internet and global branding have made book consumption increasingly collective.
(via short schrift)
New paper: fast food doesn’t make you fat.
When eating out, people reported consuming about 35 percent more calories on average than when they ate at home. But importantly, respondents reduced their caloric intake at home on days they ate out (that’s not to say that people were watching their weight, since respondents who reported consuming more at home also tended to eat more when going out). Overall, eating out increased daily caloric intake by only 24 calories. The results for urban and suburban consumers were similar.
(via marginal revolution)
Yesterday, New York raised the tax on cigarettes by $1.25. With the previous taxes, the city tax of $1.25, and the variable pricing one sees at retail outlets around the city, people are now paying somewhere between $8 and $12 for a pack of cigarettes in NYC. Some smokers are understandably upset about the price but how does it compare to other enjoyments? If smoking a single cigarette takes five minutes and at $10 & 20 cigarettes per pack, smoking costs a smoker $6/hour. Some other NYC diversions, priced roughly by the hour:
Ice skating in Central Park: $4.25/hr
Yankees game (cheap seats): $5/hr
Smoking: $6/hr
Visit to MoMA: $8/hr
After-work drinks: $10/hr
Movie w/popcorn & soda: $11/hr
Dinner @ McDonald’s: $11/hr
Dinner @ Daniel: $85/hr
Helicopter tour of NYC: $600/hr
Spitzer-grade call girl: $1000+/hr
For reference, NY State minimum wage is $7.15/hr. (Digg this?)
Has the housing downturn had a more-or-less direct effect on the rising price of milk?
I was in Vermont over the weekend and talking to a dairy farmer about the rising price of milk. I was surprised when she said that higher sawdust prices was one of the causes. Sawdust? Sawdust, it turns out, is used for bedding the cows and the price of dust has doubled in the past year. I surmise that the downturn in housing construction has meant a reduced demand for lumber and thus less sawdust.
Lipstick as economic indicator.
Ms. Stein’s rationale for buying lipstick echoes a theory once proposed by Leonard Lauder, the chairman of Estee Lauder Companies. After the terrorist attacks of 2001 deflated the economy, Mr. Lauder noticed that his company was selling more lipstick than usual. He hypothesized that lipstick purchases are a way to gauge the economy. When it’s shaky, he said, sales increase as women boost their mood with inexpensive lipstick purchases instead of $500 slingbacks.
More economic indicators: sushi, Big Macs, steakhouses, Starbucks coffee, Coca-Cola, cigarettes, and Jay-Z.
The economics of high-end prostitutes.
Unlike their low-end counterparts, high-end call girls are expected to supply some level of companionship, and often accompany clients to dinners or parties. Because a beautiful and intelligent woman inevitably has other job (and marriage) options, a very high wage is necessary to encourage them to forgo other opportunities, and risk arrest, disease and shame.
And escorts must spend a great deal maintaining their value without immediate compensation. Much time and money is spent on grooming: hair removal, expensive hair-cuts (one stylist I spoke to claims several of his clients are escorts, who spend at least $1,000 a month on extensions and colour) and regular exercise. Many women have had plastic surgery (particularly if they were once men) and maintain an expensive designer wardrobe. Frequent visits to the doctor are necessary to protect against sexually-transmitted diseases.
Despite a common heritage, the social, economic, and political differences between the United States and Britain are, in some cases, great.
Like most west Europeans, Britons tend to have more left-wing views than Americans, but the first chart shows that this is often by a surprising margin. (“Left” and “right” are harder to locate than they were: here “left” implies a big-state, secular, socially liberal, internationalist and green outlook; right, the reverse.) The data are derived by subtracting left-wing answers from right-wing ones, for each country and for each main political grouping within each country. A net minus rating suggests predominantly left-wing views and a positive rating suggests a preponderance of right-wing views.
Compared to Britain, the US is a remarkably conservative nation. The companion chart is a good look at some of the data. (via gongblog)
Point. Being nasty can improve your life.
Next month sees the arrival of Asshole: How I got Rich and Happy by Not Giving a S*** About You, by New York author Martin Kihn. “I was the nicest guy in the world - and it was killing me,” he says in the book. “My life was a dictionary without the word ‘no’. If you asked me for a favour — even the kind of favour that required me to go so far out of my way that I needed a map, a translator and an oxygen tank — even if I didn’t know you that well, I might hesitate a second, but I’d always say yes.”
Kihn walked other people’s dogs, traipsed out of his way to bring back the most complicated lunch orders for colleagues and handed over his money to whichever charity or sales scam asked for it. The result of such “kindness” was a dead-end job and a second-rate apartment.
While Gryzb recommends subtle personality changes, Kihn takes it a step further. He picked up tips from the masters - Donald Trump, Scarface and “the guy in my building with a tattoo on his face” — and decided to “blowtorch away my old personality and uncover the rock-hard warrior within”. In his book, Kihn devises a “10-step programme to assholism” for anyone wanting to acquaint themselves with their darker side. He himself signed up to the National Rifle Association, started kickboxing, screamed at colleagues and ate garlic bagels on public transport.
Counterpoint. The secret to happiness is giving.
Think you’d be happier if you won the lottery or just had a few extra bucks in your pocket? Think again. Overturning classic economic wisdom, new research shows that it’s not how much you have that matters, it’s how you spend it. People who donate their dollars to charities or splurge on gifts for others are more content than those who squander all the dough on themselves.
(via 3qd)
NY Times columnist and economist Paul Krugman wrote a paper when he was an assistant professor in 1978 called The Theory of Interstellar Trade. Here’s the abstract:
This paper extends interplanetary trade theory to an interstellar setting. It is chiefly concerned with the following question: how should interest charges on goods in transit be computed when the goods travel at close to the speed of light? This is a problem because the time taken in transit will appear less to an observer travelling with the good than to a stationary observer. A solution is derived from economic theory, and two useless but true theorems are proved.
An economic discussion about the implications of trading with aliens. No, not illegal aliens.
Why is movie popcorn so expensive? Because it subsidizes movie prices for more movie goers. That and the theaters get to keep all the profit they make on consessions; that’s generally not true for ticket sales.
The conventional theories in economics and politics contend that people act rationally. Elizabeth Kolbert reviews a pair of books that suggest that’s not really the case.
Some of these heuristics were pretty obvious — people tend to make inferences from their own experiences, so if they’ve recently seen a traffic accident they will overestimate the danger of dying in a car crash — but others were more surprising, even downright wacky. For instance, Tversky and Kahneman asked subjects to estimate what proportion of African nations were members of the United Nations. They discovered that they could influence the subjects’ responses by spinning a wheel of fortune in front of them to generate a random number: when a big number turned up, the estimates suddenly swelled.
In tied football games, the team that wins the coin toss often wins the game. Are there better ways to decide overtime games?
Dueling Kickoffs: To begin overtimes, each team will kick off to each other on consecutive plays. The team that advances the ball furthest will have possession at the point on the field where the ball was advanced. Sudden death is preserved.
Tyler Cowen on invisible competition and how it differs from competing with those around you.
Let’s look at individuals. Human beings evolved in small groups and hunter-gatherer societies, in which virtually all competition was face to face. That is the environment most of us are biologically and emotionally geared to succeed in, and it explains why our adrenalin surges when a rival wins the boss’s favor or flirts with our special someone. But in the new arena, with its faceless and anonymous competitors, those who are driven to action mostly by adrenalin will not fare well. If that’s what they need to get things done, they will become too passive and others will overtake them.
To me, the most interesting challenge is maintaining motivation in the absence of visible competition. How do you win a race you might not even know you’re running?
An attempt to decode the sex diaries of noted economist John Maynard Keynes. Keynes kept two diaries related to his sexual activities. The first was a straightforward listing of who/where/when.
The other sex diary is more puzzling and, in a way, more informative. An economist to the core, Keynes organized the second sex diary also year-by-year, but this time in quarterly increments.
Unfortunately for us, however, this second sex diary is in code. And as far as I know, no one yet has been prurient enough to crack it.
Here’s what Keynes’ tabulation looks like. For every quarter-year from 1906 to 1915, he tallies up his sexual activities and totals them under three categories: C, A, and W.
For each of these headings, he records the number of times each activity occurred, and also when. For example, between May and August, 1911, he performed (if that’s the right word) C sixteen times, A four times, and W five times.
How does the GDP of the US today compare with that of other countries in the past?
China and India combined to produce nearly half the world’s economic output in 1820 compared to just 1.8% for the U.S. Our remarkable growth since 1820 has benefited from democratic institutions, a belief in capitalism, private property rights, an entrepreneurial culture, abundant resources, openness to foreign investment, the best universities, immigration and relatively transparent markets.
Very interesting paper on the economics of prostitution by Steven Levitt and Sudhir Venkatesh.
The transaction-level data we collected suggests that street prostitution yields an average wage of $27 per hour. Given the relatively limited hours that active prostitutes work, this generates less than $20,000 annually for a women working year round in prostitution. While the wage of a prostitute is four times greater than the non-prostitution earnings these women report (approximately $7 per hour), there are tremendous risks associated with life as a prostitute. According to our estimates, a woman working as a prostitute would expect an annual average of a dozen incidents of violence and 300 instances of unprotected sex.
The authors also noted that a prostitute was “more likely to have sex with a police officer than to get officially arrested by one”. (via marginal revolution)
Ten recurring economic fallacies, 1774-2004.
One of the most persistent is that of the broken window — one breaks and this is celebrated as a boon to the economy: the window manufacturer gets an order; the hardware store sells a window; a carpenter is hired to install it; money circulates; jobs are created; the GDP goes up. In truth, of course, the economy is no better off at all.
This wasn’t meant to be Tyler Cowen day on kottke.org, but you need to check out this concise barnburner of an article written by Cowen for the Washington Post on the cost of the war in Iraq. Taking the form of a letter to President Bush, the article explores the opportunity costs of the war and then offers the real reason why the war has been disastrous:
In fact, Mr. President, your initial pro-war arguments offer the best path toward understanding why the conflict has been such a disaster for U.S. interests and global security.
Following your lead, Iraq hawks argued that, in a post-9/11 world, we needed to take out rogue regimes lest they give nuclear or biological weapons to al-Qaeda-linked terrorist groups. But each time the United States tries to do so and fails to restore order, it incurs a high — albeit unseen — opportunity cost in the future. Falling short makes it harder to take out, threaten or pressure a dangerous regime next time around.
Foreign governments, of course, drew the obvious lesson from our debacle — and from our choice of target. The United States invaded hapless Iraq, not nuclear-armed North Korea. To the real rogues, the fall of Baghdad was proof positive that it’s more important than ever to acquire nuclear weapons — and if the last superpower is bogged down in Iraq while its foes slink toward getting the bomb, so much the better. Iran, among others, has taken this lesson to heart. The ironic legacy of the war to end all proliferation will be more proliferation.
As a refreshing mint, check out the length of the y-axis on this graph comparing the cost of the war and the amount spent by the US govt on energy R&D. (thx, ivan)
Update: Noam Chomsky, in an August 2002 interview:
The planned invasion will strike another blow at the structure of international law and treaties that has been laboriously constructed over the years, in an effort to reduce the use of violence in the world, which has had such horrifying consequences. Apart from other consequences, an invasion is likely to encourage other countries to develop WMD, including a successor Iraqi government, and to lower the barriers against resort to force by others to achieve their objectives, including Russia, India, and China.
(thx, matt)
A plot of Japan’s Phillips curve (“a historical inverse relation and tradeoff between the rate of unemployment and the rate of inflation in an economy”) looks like Japan itself.
Two quick reviews of Elizabeth Currid’s book, The Warhol Economy, which argues that New York’s “vibrant creative social scene” is what makes the city go. First, James Surowiecki in the New Yorker:
Of course, everyone knows that art and culture help make New York a great place to live. But Currid goes much further, showing that the culture industry creates tremendous economic value in its own right. It is the city’s fourth-largest employer, and generates billions of dollars a year in revenue. More important, New York has no real global rival for dominance in the culture industry. Using an economic-analysis tool called a “location quotient,” Currid calculates that New York matters far more to fashion, art, and culture than to finance. To exaggerate a bit, if New York suddenly disappeared, stock markets could keep functioning, but we would not be able to dress ourselves or find art to put on the wall. Currid suggests that, in the fight among cities for business, being the center of fashion and art constitutes New York’s true “competitive advantage.”
And from The Economist:
New York’s cultural economy has reached a critical juncture, argues Ms Currid, threatened by, of all things, prosperity. The bleak economic conditions of the 1970s allowed artists to flock into dirt-cheap apartments and ushered in the East Village scene of the early 1980s. The boom of the past decade, by contrast, has priced budding Basquiats out of Manhattan, pushing them across the water to Brooklyn and New Jersey. Studio flats meant for artists-in-residence get snapped up by bankers. The closure last year of CBGB, a bar that became a punk and art-rock laboratory in the 1970s (and whose founder, Hilly Kristal, died last month) came to symbolise this squeeze.
Ms Currid sees this expulsion of talent as a serious problem. The solution, she argues, lies in a series of well-aimed public-policy measures: tax incentives, zoning that helps nightlife districts, more subsidised housing and studio space for up-and-coming artists, and more.
The first chapter of the book is available on the Princeton University Press site.
Reaganomics Finally Trickles Down To Area Man.
The $10 began its long journey into Kellener’s wallet in 1983, when a beefed-up national defense budget of $210 billion enabled the military to purchase advanced warhead-delivery systems from aerospace manufacturer Lockheed. Buoyed by a multimillion-dollar bonus, then-CEO Martin Lawler bought a house on a 5,000-acre plot in Montana….
Marginal Revolution and CNN (and New York magazine and Reddit and etc.) asked their respective readers: how much did you pay for In Rainbows, Radiohead’s new album which is only available as a pay-what-you-want download. I paid around £8.50 (~ US$17), which splits the difference between a typical album price in the UK and the US. (Actually, what I did was download it from elsewhere because Radiohead’s online store was down yesterday morning and then went back to pay for it just now.)
Tyler Cowen mentioned “green accounting” and William Nordhaus in a post the other day so I went looking for more information on the subject. Here’s one of the more succinct descriptions I found of the problem that green accounting aims to address:
When a majestic, 300-year-old red-wood is cut down and turned into picnic tables, the logging and picnic table-building activities add to the gross domestic product (GDP), while no deduction is made for the loss of that tree and all the nonmarket services it provides. When a paper mill dumps dioxin-laden wastes into a river, the paper-making boosts the GDP, but no deduction is made for the costs associated with the water pollution. Conversely, no addition is made to the GDP for the air and water cleaned by wetlands or old-growth forests.
If you’re keen on learning more about green accounting and William Nordhaus’ contributions, check out Nature’s Numbers and the perhaps not-so-riveting Recommendations to The Bureau of Economic Analysis On Improving the National Economic Accounts. (I will also humbly note that this relates to something I wrote for WorldChanging last December. “The global economy is driven by nature, and yet it’s not usually found on the accountant’s balance sheet.”)
Everything is open for negotiation and for three months, Tom Chiarella tried to get deals on everything, from a hot dog to a gallon of gas to a TiVo.
Within weeks I discovered that restaurants will typically give you four desserts for the price of three if you ask for a sampler. That a draft beer is generally good for a free refill with a little prodding. That you can get an extra 20 percent off at Ikea by pressing past the cashiers, past the floor salespeople, up into the bottommost managerial rungs, by comparing the price of one perfectly well priced dresser with its slightly less well priced but better-sized counterpart one floor down.
Update: Bargainist has a piece about how to haggle that’s worth a look.
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