Monthly Archives: December 2007

Economists rarely make good forecasts, but let me venture one: most readers of this column will eat and drink heavily over the next two weeks (as will its writer), and many of us will, on January 1, vow to do better in future. Can economics provide a little assistance in coping with this annual ritual?

I think it can, and so do three economists at Yale who’ve been helping me out. Professors Dean Karlan and Ian Ayres (who is also a law professor and the author of Supercrunchers), along with Jordan Goldberg, a business-school student, have a cheque from me for $1,000, about £500.

If I do not do 200 press-ups and 200 sit-ups each week, they’ll start sending my money to a charity, $100 at a time. (I chose the hugely deserving DC Central Kitchen.) They will shortly offer the same dubious privilege to countless others via a new company, Stickk.com – customers name their own pledges, sign pro-forma contracts, and put their cheques in the post.

The remainder of this column can be read here. Please post comments below.

Dear Economist,

My boyfriend spends a lot of time in front of the mirror, prettying himself up. I am pleased to have a well-groomed man in my life but it is a bit unnerving. Should I get him to stop?

PL, Warwick

Dear PL,

Your boyfriend’s disturbing personal-grooming habit offers you financial as well as aesthetic benefits. Economists have known for some time that better-looking people are paid more. This is probably due to a combination of discrimination against the ugly, the fact that some beautiful people have jobs where beauty is an obvious advantage, and the likelihood that better-looking people are more confident.

More recently, economists have discovered evidence that endogenous beauty (make-up, hair-styling) is as important as exogenous beauty (having Bond girl Eva Green’s eyes).

Economists Daniel Hamermesh, Xin Meng and Junsen Zhang have found that spending money on clothes and make-up slightly raises the earnings of Shanghai workers. More recently Jayoti Das and Stephen DeLoach, of Elon University’s economics department, have shown that time spent on grooming substantially improves wages, especially for men.

They estimate that each extra 10 minutes a man spends in front of the mirror will raise his wages by 6 per cent. (Women would have to spend two or three hours to get the same effect.) So if you prefer your boyfriend to be rich, don’t stand between him and his mirror.

I do not know why you’re complaining. Perhaps you’re afraid that your boyfriend is becoming too attractive to rivals. If so, dump him and find yourself someone desperate. An economist, perhaps?

Questions to economist@ft.com

He reports:

I’ve just got back from ten days abroad (from Amsterdam to Israel to several cities in China) and while I was in China AT&T cut off my phone service. Why? Because I’d apparently run up a $2,100 bill.
And how did that happen, when I hardly used the phone at all? Because the iPhone’s email app keeps automatically fetching email every ten minutes even when it’s roaming abroad. I know I am the last person on the planet to discover this…

I doubt it, Chris: you’re the editor-in-chief of Wired, for crying out loud! Read the whole story here.

Over at VoxEU – and in very similar form at our own Economist’s Forum – Paul Klemperer is concerned that the most popular proposals for fighting climate change are politically naive, given the desires of developing countries. He wants more innovation, but recognises that comes with its own problems:

Businesses know that when an innovation is sufficiently important, the innovator gets little of the benefit: the developers of drugs for AIDS, and of vaccines for Anthrax and bird flu were threatened with compulsory licenses in many countries (including in the United States) until they "voluntarily" licensed their innovations cheaply.

The difficulties of getting effective patent protection in the first place, the riskiness of much energy R&D, and the large scale of some of the necessary investments (for example, research into fusion) are further reasons why business is reluctant to undertake the needed R&D without subsidies.

So it is catastrophic that public expenditure on energy R&D has been falling in most countries over the last 30 years, and it is shameful that Europe spends a much smaller fraction of GDP on public energy R&D even than the USA and Japan. The UK is one of the worst offenders.

There are other priorities too, of course. In particular, curbing deforestation is cheap and cost-effective, and has the collateral benefit of preserving biodiversity.

But more R&D into clean energy is probably the highest priority of all. Finding a clean energy source that is cheaper than those currently available is the only politically-plausible way of curbing continuing growth in developing nations’ emissions.

The whole thing is worth a look.

Bryan Caplan is in his pomp, reviewing Philip Tetlock’s "Expert Political Judgement":

Tetlock underestimates experts in general, and does too little to discourage demagogues from misinterpreting his results.

How does Tetlock underestimate the experts? In a nutshell, his questions are too hard for experts, and too easy for chimps. Tetlock deliberately avoids asking experts what he calls "dumb questions." But it is on these so-called dumb questions that experts’ predictions shine, relative to random guessing. Conversely, by partitioning possible responses into reasonable categories… Tetlock saved the chimps from severe embarrassment that experts would have avoided on their own.

Furthermore, even if the experts are no better than Tetlock finds, he does too little to discourage demagogues from misinterpreting his results as a vindication of populism. There is only one major instance in which Tetlock compares the accuracy of experts to the accuracy of laymen. The result: The laymen (undergraduate Berkeley psychology majors – quite elite in absolute terms) were far inferior not only to experts, but to chimps.

By the way, Caplan call’s Tetlock’s book "the best book ever written on political psychology". I am not qualified to judge, but I thought it was superb. Here is a good review from the New Yorker, but it does magnify the trait Caplan complains about, which is to suggest that anyone can do better than an expert.

One of my favourite parts of Tetlock’s book is where he shows – I am paraphrasing here – that many experts have a tendency to identify too many "Black Swans". It has become the conventional wisdom that we tend to miss extreme scenarios; Tetlock offers a useful corrective (I wrote more about the subject here).

_40649551_christmaslunch203 …tiny, it seems, but you wouldn’t know it from this story. Bah! Humbug!

Academics calculated the production, processing and transportation costs of the festive ingredients. The Manchester researchers estimate a dinner for eight generates 20kg (44lbs) of carbon dioxide emissions.

Let’s accept that. But is it a big number? A reasonable estimate of the environmental cost of a ton of carbon dioxide emissions is about £10 – with a wide margin of error, admittedly. That would make the environmental cost of Christmas dinner about 20p, or 2.5p per reveller.
Merry Christmas!

Mark Thoma points us to this blog updating the world about Robert Frank’s heart attack. Professor Frank, a New York Times columnist, respected economist and author, seems to be doing quite well. In my dealings with him he’s always been unfailingly helpful and supportive – get well soon, Bob.
It would have been hard to imagine just ten years ago that people would use the internet to broadcast this kind of information. Now, the message seems far more important than the medium – as well it should.

Here. One more reason to subscribe to Boing Boing.

Im_0005_6_2 As the Christmas boardgames season approaches (although for your correspondent, boardgames are a perennial activity), time for the first in a series of posts about the ideal Christmas boardgame. (Bryan Caplan, I’m calling you out: what IS the ideal Christmas boardgame?)

Today, let us consider Monopoly. Why has it been such a successful game, despite the fact that the gameplay is famously lousy? This is a game that tends to end with a whimper – a slow strangulation whereby it is obvious who is going to win, but it takes a long time to get there.

I suggest two reasons, only one of which belongs on an economics blog:

1) The game offers frequent adrenaline hits. Every couple of minutes, somebody makes a dice roll in which the outcome will be hugely important and everyone knows it. Even poker doesn’t deliver quite as many moments of crisis.

2) Lock-in. It is time-consuming to explain a game to new players and in most social settings it is embarassing even to suggest it. However, nobody needs the game of Monopoly explained (just a few house rules straightened out). I suggest that Monopoly’s success has fed on itself. It is always a reliable choice simply because everyone knows how to play it.
In this respect, Monopoly is like the QWERTY keyboard, the poster-child for lock-in of a suboptimal technology. The standard story – told here by economic historian Paul David – is that the keyboard is painfully slow but it’s what everyone learns to type on. It is not worth most people’s while to discard their old knowledge and learn to type on a faster keyboard layout, such as Dvorak. Hence, despite a free market in keyboards, we’re all locked in to a duff piece of technology. (For the alternative view, see here.)

Recently I was invited to a large, televised debate about how we should deal with climate change. The circumstances were spectacularly intimidating, with Tory grandees Nigel Lawson and John Redwood poised to respond to my remarks. (Despite my nerves, I resisted the temptation to follow the old public-speaking advice and imagine my fellow panellists naked.) I was the first to speak, so stood up and I talked about the cappuccino I’d bought that morning.

The curious thing about the cappuccino, I observed, is what a remarkably complicated product it is. The milk came from a methane-producing dairy herd, probably somewhere in the UK but perhaps further afield. Behind the scenes stood the farmers, the cattle breeders, the manufacturers of refrigerated tanker trucks and countless unknown others. The coffee was steamed out of Brazilian beans using a machine of Italian manufacture. The machine was electric, although whether the electricity came from coal or gas or tidal power I have no idea. The complexities are endless. (This whole tale is the kind of story economists like to tell each other, originating – I believe – in “I, Pencil”, a 1958 essay by Leonard Read.)

Then there was my choice of where to buy the cappuccino, how to get to the cafe, and whether to buy it at all. Those decisions were shaped by the location of the FT offices and the location of Borough Market.

The remainder of this column can be read here. Please post comments below.
 

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