Posts Tagged “economics”
Ross • 1st Mar 2010 • Uncategorized • air miles, airmiles, arbitrage, california, economics, finance, hacks, money, pudding, reward, saving, usa
Why the museum of arbitrage? Well, because if arbitrage existed now, I would be doing it rather than writing this.
In 1999, UC-Davis civil engineer David Phillips was grocery shopping when he noticed something peculiar. Healthy Choice Foods was offering frequent-flyer miles to customers who bought its products. But a 25-cent pudding would bring 100 miles — the reward was worth more than the product itself.
Recognizing a good thing, Phillips bought 12,150 servings of pudding for $3,140, claiming he was stocking up for Y2K. Then he enlisted the Salvation Army to help him peel off the UPC codes, in exchange for donating the pudding.
He mailed his submission to Healthy Choice, and to their credit they awarded him 1.25 million frequent-flyer miles, enough for 31 round trips to Europe, 42 to Hawaii, 21 to Australia, or 50 anywhere in the United States.
There’s no downside. Phillips also got Aadvantage Gold status for life with American Airlines, which brings a special reservations number, priority boarding, upgrades, and bonus miles. And he got an $815 tax writeoff for donating the pudding.
Lifted wholesale from Futility Closet.
Ross • 1st Feb 2010 • Thinking • economics, government debt, politics, public finances, spending, Thinking, usa
Sometimes you read something that makes you challenge your opinions, in a positive way. Steve Landsburg’s piece on government spending vs government debt did that for me today. His argument: it’s not government debt that is problematic, but government spending.
Ross • 8th Nov 2009 • Learning, Thinking • africa, aid, Dambisa Moyo, development, economics, international development, William Easterly
I have just finished this book, by Dambisa Moyo. It’s a very simple argument. So simple that the preface by Niall Ferguson means you can skip the majority of the book. After an hour, you’ll have the idea. As Niall points out, it’s slightly annoying that these arguments are taken more seriously when they come from Dambisa, an intelligent, attractive Ghanaian, rather than from older, whiter (but equally intelligent) critics of aid, such as Bill Easterly. But that’s not to the discredit of Ms Moyo or the arguments. Somebody needs to get the fact that aid is not the answer on the radar. Moyo does a good job as the ‘anti-Bono’.
Ross • 25th Oct 2009 • Learning, Thinking • academic, economics, Goodin, governance, government, MPA, Niskanen, politics, public administration, public choice, public policy
I volunteered to do a summary of a piece of non-core reading for my MPA class this week. The piece I chose was:
Goodin, R. (1982) ‘Rational Politicians and Rational Bureaucrats in Washington and Whitehall’, Public Administration, Vol. 60, pp. 23-41.
This paper is a discussion and reformulation of Niskanen’s model of decision-making. This model has apparently been very influential, especially with Keith Joseph.
First, the paper outlines what it was that Niskanen thought:
The bare bones of Niskanen’d model are very simple indeed. Basically, there are two types of actors: bureaucrats and politicians. The relationship between them is one of bilateral monopoly. The bureaucrats are the sole suppliers of public goods and services, and politicians are the only buyers of bureaucratic outputs. The goals of each actor are equally simple. Bureaucrats are aiming to maximise theor agency’s budget…. Politicians, in turn are aiming to maximise the votes cast for them at the next election….
Niskanen’s thesis is that, owing to special features on both sides of this bargaining game [namely the way that Congressional committees that authorise budgets are stuffed with those who benefit disproportionately from those budgets] public goods and services are oversupplied at a rate of anything up to twice what would be optimal in terms of citizen preferences.
As the paper discusses, this model leads Niskanen to recommend many NPM style government reforms, to enable bureaucrats to compete for resources.
Goodin applauds this model for its simplicity, but doesn’t think that it offers a good description of decision-making, for a large number of reasons, such as:
- He doesn’t think that bureaucrats would ‘bare faced lie’ about their budgetary needs, as this is both not lucrative (they need to be credible) and very high risk
- The Congressional budget approval procedure altered with the creation of the Congressional Budget Office and other reforms in the 1970s – these mean that budgets are considered in places other than just on committees of vested interests
- Niskanen doesn’t follow up the flip side of his argument and identify when budgets may be lower than desired, and bureaucratic outputs undersupplied. Goodin thinks that this would happen when issues fell between defined policy areas (e.g. Climate Change)
- Goodin doesn’t think that Niskanen’s answer – trying to get bureaucrats to compete – is sensible, because they would be more likely to collude with each other
- Goodin says that Niskanen’s simplistic view of bureaucrat and politican motivation is dated and does not reflect more modern thinking that people care about the policies they work on
As a result of these criticisms, Goodin offers an alternative model in which bureaucrats and politicians collude to overload oversight bodies with information, and use the ensuing confusion to bid for higher budgets. This results in the skewed spending around core programme areas, leaving too little for cross-cutting or broadly defined issues.
In general, this is a refreshingly clear article. However, I found it odd that it did not pick up on the one obvious criticism of Niskanen’s model that occurred to me straight away: Niskanen posits that as a monopoly provider of bureaucratic goods and services, bureaucrats would oversupply and overcharge. Indeed, it appears (from Goodin’s discussion) that he confused the two, or saw them as synonymous. But this is odd, given that it is a standard tenet of economic theory that monopolists undersupply and overcharge. If one grafts this assumption to Goodin’s rebuilt model, you get the worst of both worlds – a collusive bureaucratic-political machine that under-delivers and overcharges in core areas, and doesn’t deliver at all in non-core ones. Impartiality prevents me from commenting on whether this is an accurate picture of Washington or Whitehall.
Ross • 7th Oct 2009 • Learning, Thinking • economics, food, health, MPA, new york, nutrition, policy, policy analysis, public health, usa
Via the blog Cheep Talk, I came across a good example for the policy analysis unit of my Masters course.
The New York Times reports that although people say that they make healthier choices when calorie-counts are displayed on fast-food menus, based on evidence from their receipts, the opposite is in fact true. At least in some areas, people are, on average, ordering more calories than before the labelling requirements were introduced.
This is a useful counter-factual for the type of ‘libertarian paternalism’ promoted in Sunstein and Thaler’s pop-policy book, Nudge.
For what it’s worth, I think that this example may be skewed by the demographic in the poorer areas in which receipts were collected. Perhaps people are maximising their calories per dollar. This is, in many ways, the natural human instinct.
The recession may also play a role here. I would be interested to know if this receipt-collection exercise had a control – a measurement of whether calorie consumption had gone up in similar cities where these measures had not be introduced. Without that, how can you rule out the possibility that people comfort-eat in a recession?
Ross • 6th Oct 2009 • Learning, Living, Thinking • computing, economics, grid computing, ideas, internet, market, marketplace, technology
I think of a number of ideas about new concepts, products and companies every day. The overwhelming majority of these ideas are terrible. However, occasionally I think of something worth developing further. My first step is to check to see if I got there too late. A couple of quick Google searches and normally I will have proved that there are indeed no new things under the sun.
This morning I thought: “What if, instead of donating your surplus computing capacity (idle processor time, storage or bandwidth) to a project like Seti@home, you could set a price for that capacity and trade it on a global marketplace? You could enter your input prices, which would mainly reflect your power/energy costs, and then the market would allocate computing tasks in an efficient manner.”
I followed it up further and I am far from the first person to have this idea, it seems.
- The GridEcon Research Project exploring “a marketplace for computing resources” (PDF)
- “Compute Power Market: Towards a Market-Orientated Grid” (PDF)
- Zimory, a (live?) German system
I am not annoyed that I didn’t get there first – in retrospect, it’s an obvious idea. I would, however, have been annoyed if I had put time into this idea before realising that others were working on it. In this way, the internet saves me years of thinking time.
Ross • 28th Sep 2009 • Living, Thinking • economics, fashion, london, savile row, suits, tailoring
Venerable Savile Row tailors are concerned that upstarts are degrading the Row’s reputation by taking orders in W1 for manufacture elsewhere, reports the BBC:
Fashion experts such as Eric Musgrave, who used to be editor of Drapers magazine, says the traditional tailors in Savile Row should press for protected geographical status under EU law.
He said: “You can only call a fizzy white wine champagne if it comes from the Champagne region. You can only call ham Parma ham if it comes from Parma.
“I think the boys on Savile Row should continue battling until they get their definition that ‘Savile Row Bespoke’ can only be made on Savile Row and the defined area around it.”
To that end the Savile Row Bespoke Association is launching a quality mark to distinguish its products from other companies who sell “made-to-measure” suits under the banner “Savile Row Bespoke”.
That would allow potential customers to at least know what they are buying when they pay for their hand-tailored suit.
This raises several questions for me. Firstly, is this a protectionist quest to preserve the economic rent that derives from owning some prime tailoring real estate, or a legitimate attempt to increase the level of information available to customers in the market? More practically, is there are quality difference between suits made elsewhere in the UK (or Europe) and actually on the Row that is noticeable even when all other factors (service location, fitting, etc.) is held the same?
Either way, this article is itself a good bit of PR for – Dege & Skinner and an advert for Sartoriani.
Ross • 16th Aug 2009 • Living, Thinking • economics, politics, railways
A work meeting last week reminded me of Frederic Bastiat’s quip:
The state is the great fiction by which everyone seeks to live at the expense of everyone else.
Looking the quotation up, I discovered that Bastiat’s Economic Sophisms covered the economic impact of new railways. Can it be mere coincidence that this is what the meeting was about?
Ross • 13th Aug 2009 • Learning, Thinking • academic, economics, relativity, space, special relativity, time, trade
Paul Krugman’s Theory of Interstellar Trade (.pdf) may be the best economics paper I have read. Figure II, in particular. Krugman notes that:
It should be noted that while the subject of this paper is silly, the analysis actually does make sense. This paper, then, is a serious analysis of a ridiculous subject, which is of course the opposite of what is usual in economics.
He goes on to develop the First Fundamental Theorum of Interstellar Trade:
When trade takes place between two planets in a common inertial frame, the interest cost on goods in transit should be calculated by using time measured by clocks in the common frame, and not by clocks in the frames of the travelling spacecraft.
As promised, this does make sense. What a fascinating paper.
Ross • 12th Aug 2009 • Learning, Living • economics, history, japan, ninja, work
The Business Environment Unit (BEU) is no more. I now work in the New Industry, New Jobs Directorate (NINJa). According to this excellent paper:
…the ninja were but one manifestation of fierce and extensive resistance to encroaching armies in the dying years of medieval Japan…. [they] armed themselves with simple weapons and guerrilla techniques…
Not a bad fit to my new unit. However:
…the ninja and the communities they defended were eventually slaughtered or intimidated into quiescence by the powerful armies of the “unifiers” like Oda Nobunaga and Toyotomi Hideyoshi in the 16th century.
Not the best omen.
