Posts Tagged ‘economics’
“If economists could manage to get themselves thought of as humble, competent people on a level with dentists, that would be splendid”*…
There are plenty of economics terms regular people would find not only very interesting, but useful for thinking about policy. Sadly, the most commonly used econ words tend to be the ones with the vaguest meanings — “rational,” “equilibrium” and “efficient.” Instead, here are some of my suggestions:
Everyone knows that correlation doesn’t equal causation, but somehow people seem to forget. Endogeneity is a word that can help you remember. Something is endogenous when you don’t know whether it’s a cause or an effect (or both). For example, lots of people note that people who go to college tend to make more money. But how much of this is because college boosts earning power, and how much is because smarter, harder-working, better-connected people tend to go to college in the first place? It’s endogenous. The media is full of stories about how which kind of people stay married, or what diet is associated with better health. Whenever you see these stories, you should ask “What about endogeneity?”…
* John Maynard Keynes
As we get dismal, we might send fancy birthday greetings to Sir Frederick Henry Royce; he was born on this date in 1863. An engineer and car designer, he founded (with Charles Rolls and Claude Johnson) the Rolls-Royce company, which introduced the first successful luxury cars in the emerging automotive industry.
We should remember that we will pass down a whole society to our kids—including the natural environment that underwrites the quality of life of future generations. If the cost of ensuring that large numbers of children do not grow up in poverty and that the planet is not destroyed by global warming is a somewhat higher current or future tax burden, that hardly seems like a bad deal—especially if the burden is apportioned fairly. Now suppose, by contrast, that we hand our kids a country in which large segments of the population are unhealthy and uneducated and the environment has been devastated by global warming, but we have managed to pay off the national debt. That is, after all, the future that many in the mainstream of the economics profession are prescribing for the country. Somehow, I don’t see future generations thanking us…
Economists have botched the promise of widely distributed prosperity: why they have no intention of stopping now– and why that matters so much: “The Wrongest Profession.”
* John Kenneth Galbraith
As we recalculate, we might recall that it was on this date in 1602 that Vereenigde Oost-Indische Compagnie (VOC, or The Dutch East India Company, as it’s known in the Anglophone world) was born. Generally considered the world’s first trans-national corporation and the first publicly to issue stocks and bonds (and the first company to be ever actually listed on an official stock exchange), it began with a 21-year monopoly on the Dutch spice trade. The VOC also prefigured the mega-corporation of today in that it had quasi-governmental powers, including the ability to wage war, imprison and execute convicts, negotiate treaties, strike its own coins, and establish colonies. Considered by many to be the greatest corporation in history, the VOC eclipsed all of its rivals in international trade for almost 200 years.
Let’s imagine we’re on a beach that’s a mile long, and on that beach there are a couple of ice cream carts…
Let’s also imagine that the ice cream sold at each cart is identical in quality and cost, so the only reason customers choose one cart over the other is when one cart is closer. Given all of that, the best location of the carts is with each cart halfway between the middle of the beach and one of the ends. In this arrangement each cart gets 50% of the customers, and no one has to walk more than 1/4 mile to get some ice cream.
But what if one of the ice cream vendors decides to move their cart a bit closer to the middle of the beach…
They are now the ice cream cart of choice for a bigger segment of the beach, and will get more business. The other ice cream cart has no choice but to retaliate…
Now once again they each serve the same percentage of the beach-going public. Since any further movement by either cart would mean a loss of business for that cart, they end up permanently side by side, in the middle of the beach, even though this is a less optimal location for their customers.
That is a simple example of something called Hotelling’s law; the tendency of competing products to end up as similar as possible…
As we nose around for niches, we might send ambitious birthday greetings to Count Giovanni Pico della Mirandola; he was born on this date in 1463. An Italian philosopher, he undertook, in 1486, at the age of 23, to defend 900 theses on religion, philosophy, natural philosophy and magic against all comers, in the process of which he wrote his famous Oration on the Dignity of Man, which has been called the “Manifesto of the Renaissance”; a revitalization of Neo-Platonism, it was a seminal text of Renaissance humanism and of what has been called the “Hermetic Reformation.”
“The man who invented doritos has passed away at the age of 97. He asked to be buried with the creators of Fritos and Cheetos in a variety pack”*…
All told, there are 26 separate ingredients in Doritos Nacho Cheese Tortilla Chips…
While most of these individual ingredients aren’t all that bad for us, they’re a cheese-dust-covered grenade when consumed together. “The more you mess with food, the more you’re demanding your immune system to figure out what the heck all these new things are — and it can make mistakes,” Shanahan says. For instance, studies show that over-processed foods have contributed to the rise in food allergies in Western countries.
Weirdly, while the ingredients that sound like they’d be unhealthy (i.e., disodium inosinate) aren’t really all that bad, the ingredients we think we recognize (i.e., vegetable oils) are slowly waging the real war on our insides. “The main thing people need to pay attention to are the first few ingredients in these foods, like vegetable oil,” Shanahan urges. “Vegetable oils alone can cause diabetes, and they don’t even contain any sugar.”
All 26 ingredients in America’s favorite cheese-flavored chip, singly and as a whole, explained: “What’s in This?: Doritos Nacho Cheese Tortilla Chips.”
* Jimmy Fallon
As we wipe our fingers, we might send apocalyptic birthday greetings to The Reverend Thomas Robert Malthus; he was born on this date in 1766. An English cleric and scholar, he was influential both in political economy and demography. He is best remembered for his 1798 essay on population growth, in which he argued that population multiplies geometrically and food arithmetically; thus, whenever the food supply increases, population will rapidly grow to eliminate the abundance, leading inevitably to disastrous results – famine, disease and/or war… a conclusion that remains controversial to this day.
Ikea is a behemoth. The home furnishing company uses 1 percent of the planet’s lumber, it says, and the 530 million cubic feet of wood used to make Ikea furniture each year pulls with its own kind of twisted gravity. For many, a sojourn to the enormous blue-and-yellow store winds up defining the space in which they sit, cook, eat and sleep.
All that wood is turned into furniture that tries to bring a spare, modern aesthetic to the masses. “We’re talking about democratizing design,” Marty Marston, a product public relations manager at Ikea, told me.
The furniture is also sold according to some unique economics. In many cases, Ikea’s famously affordable pieces get dramatically cheaper year after year. In others, prices creep up. In some cases, products disappear entirely. The result is an ever-evolving, survival-of-the-fittest catalog that wields an enormous amount of influence over residential interiors…
Pull up a chair at “The Weird Economics Of Ikea.”
* Arthur Conan Doyle,
As we avoid the meatballs, we might spare a thought for Sir Thomas Bouch; he died on this date in 1880. A railway engineer and executive whose career began at age 17, Bouch was knighted for designing the two-mile-long Tay River Bridge— on which an estimated 75 people died when the bridge collapsed. An enquiry found Bouch to be liable, by virtue of bad design and construction; he died four months after the verdict.
Bouch is thus also indirectly responsible for the best-known poem, “The Tay Bridge Disaster,” by the gentleman widely-regarded to have been the the worst published poet in British history, William Topaz McGonagall.
“The curious mind embraces science; the gifted and sensitive, the arts; the practical, business; the leftover becomes an economist”*…
Congratulations are in order to Oliver Hart and Bengt Holmstrom, winners on 10 October of the Nobel Memorial Prize in Economics. Even though economics is not a full-fledged Nobel Prize, it has been earned by some splendid social scientists over the years — including a number of people who are not economists at all, from Herbert Simon and John Nash to Daniel Kahneman and Elinor Ostrom.Yet this week I would rather discuss a different prize: the Ig Nobel prize for economics. The Ig Nobels are an enormously silly affair: they have been awarded for a study of dinosaur gaits that involved attaching weighted sticks to chickens (the biology prize), for studying stinky feet (medicine) and for figuring out why shower curtains tend to billow inwards when you’re taking a shower (physics).
But one of the Ig Nobel’s charms is that this ridiculous research might actually tell us something about the world. David Dunning and Justin Kruger received an Ig Nobel prize in psychology for their discovery that incompetent people rarely realise they are incompetent; the Dunning-Kruger effect is now widely cited. Dorian Raymer and Douglas Smith won an Ig Nobel in physics for their discovery that hair and string have a tendency to become tangled — potentially an important line of research in understanding the structure of DNA. Most famously, Andre Geim’s Ig Nobel in physics for levitating a live frog was promptly followed by a proper Nobel Prize in the same subject for the discovery of graphene.
A whimsical curiosity about the world is something to be encouraged. No wonder that the credo of the Ig Nobel prizes is that they should make you laugh, then make you think…
The Undercover Economist (Tim Harford) on “The Ig Nobel prizes in Economics – in praise of ridiculous research.”
* Nassim Nicholas Taleb,
As we prepare our entries for the Golden Fleece Award, we might recall that it was on this date in 1948 that residents of Donora, PA went to bed as usual, not knowing that a suffocating cloud of industrial gases would descend upon them during the night. The cloud, a poisonous mix of sulfur dioxide, carbon monoxide and metal dust, came from the smokestacks of the local zinc smelter where most of the town worked. Over the next five days, twenty residents died and half the town’s population – 7000 people – needed medical attention for their difficulty breathing. The Donora tragedy shocked the nation and marked a turning point in the national dialogue about industrial pollution and its effect on health.
Religion in the United States has “revenues” of $1.2 Trillion a year– more than the combined revenues of the top 10 technology companies in the US, including Apple, Amazon, and Google– making it equivalent to the 15th largest national economy in the world.
Read the pecuniary particulars at “Religion in US ‘worth more than Google and Apple combined’.”
Download the underlying research– “The Socioeconomic Contributions of Religion to American Society: An Empirical Analysis” by Brian Grim of Georgetown University and Melissa Grim of the Newseum Institute– as a pdf here.
And for a concrete example of evangelical economic activity that may be happening off of the reader’s radar, consider the phenomenon that’s the subject of the film reviewed here.
* Robert Frost
As we pass the offering plate, we might recall that it was on this date in 1895 that Daniel David Palmer gave the first chiropractic adjustment to Harvey Lillard in Davenport, Iowa. Palmer had been practicing in Davenport for thirty years as a magnetic healer. During this time, he developed the theory that misalignment of the bones in the body was the basic underlying cause of all “dis-ease,” and the majority of these mis-alignments were in the spinal column. On learning that Lillard, the janitor in his building, had a hearing problem, Palmer adjusted his spine, which, Palmer reported, cured the ailment– a claim that was seminal to Chiropractic history.
Davenport is now the home of Palmer Chiropractic College.