Monthly Archives: March 2010

“People in relationships are more likely to do sport at least once a week, with the probability increasing for women by 34 percentage points and for me by 20 percentage points.” This is surprising to me for several reasons: singles have more time (I think) and more incentive to get fit to attract a mate. The research also contradicts my own experience.

But hey ho, this is why we find statistics useful from time to time. The research is by Stefanie Neimann and Hendrik Schmitz and comes to me courtesy of the Royal Economic Society.

The second in my soon-to-be-classic series of hits from the archive, this one from November 2005:

Few costs infuriate the modern consumer more than the price at the pump. Type “fuel price riots” into Google for a list of fatal incidents from Yemen to Indonesia. US pundits have been raging against “price gouging” in the wake of Hurricane Katrina’s damage to the energy infrastructure, while in Britain a fuel protest never seems far away. There are plenty of reasons why oil prices should be high at the moment: record world economic growth, disappointing exploration results, disruptions in Venezuela, Nigeria and Iraq, and a Gulf of Mexico full of storm-damaged drilling rigs. But motorists may wonder why the price of petrol leaps up so quickly when the crude oil it comes from was sold when the price was much lower.

It can take weeks or months for oil to get from the fields beneath the Gulf of Mexico into an SUV’s petrol tank. So while crude oil prices have risen, and with them the wholesale price of refined gasoline, the underground tanks at petrol stations have been full of cheaper petrol bought earlier. Yet the price at the pump has risen quickly. It’s infuriating to be paying tomorrow’s high prices today. Surely this is price-gouging?

Surely it is! Or is there something more to it? Only one way to find out…

A loyal reader writes:

As an avid reader of your column in the FT, I thank you for your continued focus on bringing a rational and humourous viewpoint and solution to everyday issues.
However, the column this weekend had the statement that something was “eight times less” than something else (CO2 emissions, I believe).
As any math teacher (and English) could tell you, something which is a whole number (eight for example) multiplied by some other figure will always result in a  larger outcome.
Perhaps you meant to say 1/8th (one-eighth) as much? This is the correct, and preferred way to express a reductive comparison…

I knew there would be complaints when I wrote it. Some people have expressed similar criticisms far less politely than this.

My response:

Not that surprising, but this is one of the papers emerging from the Royal Economic Society conference I’m attending this week. The effect is large, especially for men: hourly wages up by a third. Here’s the press release:

Being fluent in English increases the hourly wages of men in India by 34% and of women by 22% relative to people who speak no English. The return to English language skills for men is as much as the return to completing secondary school and half as much as the return to completing an undergraduate degree.

At the moment it’s hard to figure out who is disbursing aid to whom, when, and on what. In an ideal world, anyone in the world would be able to see exactly what money is being spent, in real time (or even looking ahead a year or two), what it’s supposed to be being spent on, and where – down to the local level – the money is supposed to be going. Taxpayers in donor countries have a right to know; donor agencies themselves should be able to coordinate better with each other; and the citizens of recipient countries could also benefit from seeing what money their governments are accepting, and for what purpose. (Owen Barder has more, much more.)

But now data on development aid is getting more transparent. David Roodman calls my attention to a brand new website, AidData.org, which is designed to be an accessible portal through which different users can find out what’s going on in the world of aid. Check it out, Aid Nerds!

In 1983, Edward Leamer published an article with contents that would become almost as celebrated as its title. “Let’s Take the Con Out of Econometrics” began with an analogy that remains useful. Imagine an agricultural researcher who tests the effectiveness of a new fertiliser by dividing land into strips and spreading the new fertiliser only on a randomly chosen selection of those strips. Because of the randomisation, any effect will presumably be thanks to the fertiliser.

The remainder of the article can be read here. Please post comments below.

A growing trend among my fellow students is converting to vegetarianism for environmental reasons, citing statistics that meat production, in particular beef, is a tremendous cause of greenhouse gas emissions. I was wondering if you could provide some insight into the actual environmental cost of a steak. How does it compare to driving, or flying? Would a simple tax on beef production be much more efficient than vegetarianism?
Max

The answer to this question can be read here. Please post comments below.

In his UK budget speech on Wednesday, Alistair Darling included the following line:

“I believe those who have benefited the most from the strong growth in incomes in past years should now pay their fair share of tax.”

This is partly rhetoric, but partly reflects a common illusion on the part of any government planner looking at a statistical digest in front of him. Government figures are often broken down into categories: “top income decile” perhaps, or “over-65s”. It’s easy to forget, staring at those categories, that the people in them change from year to year.

Let’s be clear about this. The “strong growth in incomes in past years” began in the early 1990s. Many of the people now about to pay income tax at 50 per cent – in fact, I will stick my neck out and say “most” – were not earning anything like that amount of cash in 1992. Someone 45 years old today, and in prime position to be a top-rate tax payer, would have been just 27 years old when the “strong growth in incomes” began.

It’s official! Television makes you sad but computers, phones and music players make you happy. This is something I always knew but good to get the official take from the profession:

Technological Affluence and Subjective Well-Being

Georgios Kavetsos
Cass Business School

Pantelis Koutroumpis
Imperial College London – Tanaka Business School; European Union – European Investment Bank

This study measures the welfare effects of technological goods using a pooled cross-sectional dataset for European countries. Using self-reported life satisfaction as a measure of subjective well-being we find that a fixed phone, a mobile phone, a compact disk player, a computer and an Internet connection are all associated with higher levels of well-being, whereas television sets are associated with lower levels. We further provide evidence suggesting that the level of mobile and broadband penetration matters for life satisfaction as well. Our estimates indicate that, at a minimum, an individual requires a 10% increase in GDP per capita as compensation to seize [cease? - TH] holding these products. Further implications suggest that increasing mobile penetration by 10% has limited effects on implied GDP per capita, contrary to a similar increase in broadband penetration.

I knew it, I knew it, I knew it. I’ve never owned a television and I’m happy as Larry, me.

I try not to have strong opinions on the budget, for two reasons. First, macroeconomics is witchcraft. I’ll never understand it. Second, budgets are typically foolish exercises. In good years they drape tinsel over presents already under the Christmas tree. In bad years, they rearrange the deckchairs on the Titanic. (I’ll let you decide which is the relevant metaphor this year, shall I?)

As my traditional public service, let me translate some of these budget numbers into human scale. I’ve simply divided everything by 60 million, roughly the number of people in the country, and rounded to two significant figures.

The Undercover Economist: a guide

Publishing schedule: Excerpts from "The Undercover Economist" and "Dear Economist", Tim's weekly columns for the FT Magazine, are published on this blog on Saturday mornings.
More about Tim: Tim also writes editorials for the FT, presents Radio 4's More or Less and is the author of "The Undercover Economist" and "The Logic of Life".
Comment: To comment, please register with FT.com, which you can do for free here. Please also read our comments policy here.
Contact: Tim's contact address is: economist@ft.com
Time: UK time is shown on posts.
Follow: A link to the blog's RSS feeds is at the top of the page.
Follow on Twitter
FT blogs: See the full range of the FT's blogs here.