Monthly Archives: April 2010

Here’s The Economist’s Lexington this week:

IMAGINE that the world consists of 20 men and 20 women, all of them heterosexual and in search of a mate. Since the numbers are even, everyone can find a partner. But what happens if you take away one man? You might not think this would make much difference. You would be wrong, argues Tim Harford, a British economist, in a book called “The Logic of Life”. With 20 women pursuing 19 men, one woman faces the prospect of spinsterhood. So she ups her game. Perhaps she dresses more seductively. Perhaps she makes an extra effort to be obliging. Somehow or other, she “steals” a man from one of her fellow women. That newly single woman then ups her game, too, to steal a man from someone else. A chain reaction ensues. Before long, every woman has to try harder, and every man can relax a little.

Real life is more complicated, of course, but this simple model illustrates an important truth. In the marriage market, numbers matter. And among African-Americans, the disparity is much worse than in Mr Harford’s imaginary example. Between the ages of 20 and 29, one black man in nine is behind bars. For black women of the same age, the figure is about one in 150. For obvious reasons, convicts are excluded from the dating pool. And many women also steer clear of ex-cons, which makes a big difference when one young black man in three can expect to be locked up at some point.

Lexington clearly has excellent taste in books. The rest of the column is well worth a read, and includes reference to the academic work which informed me. Here is Lexington’s blog post with extra details. Here is the relevant extract from the Logic of LIfe. And here’s another piece I wrote about Kerwin Charles’s fascinating research agenda – this time on what car pooling tells you about racial preferences.

This from Miles Corak, the international guru on income mobility:

Miles Corak, Patrizio Piraino:

The Intergenerational Transmission of Employers

Abstract:
We find that about 40% of a cohort of young Canadian men has been employed with an employer for whom their father also worked; and six to nine percent have the same employer in adulthood. The intergenerational transmission of employers is positively related to paternal earnings, particularly at the very top of the earnings distribution, and to the presence of self-employment income and the number of employers with which the father has had direct contact. It has an important influence in determining nonlinear patterns in the intergenerational elasticity of earnings.

Hm. I have never shared an employer with my father, but then, I am not Canadian.

Here’s an interesting idea, although the first sentence is transparently false:

Nobody has noticed that today’s tariff schemes actually encourage consumption. Instead we need tariff schemes that encourage conservation.

One option is “reverse pricing”, a simple framework that would increase the marginal cost of energy without introducing new taxes or raising average prices. This is important because marginal prices affect our behaviour, but total expenditure affects our wealth. So if we can increase one but not the other, we will create incentives to consume less without leaving households worse off overall.

At present, marginal prices are as low as they can be… you are paying about 23p each for your first 500 units, and 10p or 11p each thereafter. So your marginal rate is about half your starter rate. The same is true for gas pricing. It is not rocket science, just a version of the bulk buy discount you see on the high street every day. But the result is that your energy gets cheaper and cheaper, the more of it you use.

This is madness. And the more so, since a better pricing scheme is available which is equally simple. Consider the effect of a government requirement that energy tariffs be organised in three tiers, with prices rising in each tier. For argument’s sake, we could have prices double from one tier to the next, instead of falling off by 50 per cent as at present. This is an example of a “reverse pricing” regime.

The government or regulator would have to impose such a scheme (there is a sound business logic behind bulk discounts) and I have not been able to think through the ramifications on whether competition would work well. A carbon tax is still the first-best approach. Still: interesting. The source is an FT comment piece by Sam Arie, who claims to answer all questions here.

From 12th Nov 2005:

The other day I was hurrying to lunch on somebody else’s expense account at a very nice Washington restaurant, The Oval Room. I began to fret that clad in my weathered racing green leather coat, I had as much chance of talking my way into the White House across the street as getting past the maitre’d without a jacket and tie.

Summoning up indignation in advance, I angrily asked myself why anyone would turn away the guest of a paying customer. Scruffs pay the bill the same as anyone else, so isn’t the dress code of jacket and tie commercial suicide?

Actually, the smart restaurateur, armed with the swift feedback of market forces, does what governments tend to find rather difficult: balance the competing interests of different people. Some people will pay to eat a meal surrounded by the smart set. Other people will pay to eat a meal without having to dress up. The restaurateur gets to decide whose wishes count – the snobs or the slobs.

Continued at timharford.com.

One of the pleasures of being at the Royal Economic Society last week was the chance to sit next to David Warsh at dinner. Every minute with him is an education – it’s a bit like an Oxbridge tutorial, only the subject is economics journalism and the student is old enough to appreciate the privilege.

David covered economics – and, distinctively, economists – for many years for the Boston Globe. His weekly column has now migrated online to Economic Principals. You should all be reading it. And I also strongly recommend David’s book, Knowledge and the Wealth of Nations. (My review of Knowledge and the Wealth of Nations is here.)

I also met Olaf Storbeck, co-author of the very enjoyable Economics 2.0.

And of course, I also saw some very interesting economics research, but you can read about that in the column over the next few weeks.

On a visit to India last year, I bought some shampoo from a roadside kiosk in Kolkata. This was largely unremarkable, although like any shopping trip further afield than Dublin, it brought a frisson of excitement.

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

I was in a long-distance relationship with my ex-girlfriend for six months, I in Bangladesh and she in England. At first, everything was perfect, but then her demand curve for me seemed to be slowly shifting to the left. Paranoid, I started giving her a lot more attention, thereby increasing my supply. My price and marginal utility fell. We broke up once, but I convinced her to come back.
We went back to normal and we talked for hours everyday. I decided I would move for her and managed to get offers to study economics in the UK. She started acting very oddly, and a few days ago, she said she doesn’t love me any more and completely broke up with me.
We’re still friends and she’s started making excuses that don’t seem too rational. I think she’s confused and that she’ll come back if I play my cards right. Should I sharply reduce supply and hope that my price goes up? I love her more than anything. My demand curve for her is perfectly inelastic.
Anon, Bangladesh

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

Stefan Klein’s “Leonardo’s Legacy” looks like a really accessible, wide-ranging discussion of just how amazing Leonardo Da Vinci was and what it means for us today. On the strength of a very quick flick through and my enjoyment of Stefan’s earlier books, I recommend it.

Sheena Iyengar “The Art of Choosing“. Iyengar is a psychologist who has done interesting work on the “paradox of choice” and worked with Ray Fisman on the statistics of speed-dating. Her book seems to rely heavily on Sheena’s own personal story and research, much as Dan Ariely’s “Predictably Irrational” did, I’ve not yet read enough to work out whether it is as successfully executed.

Cash on Delivery“, a wonkish book from the Center for Global Development. The idea here is that donors hand out cash to countries which meet certain targets. At the moment we hand out cash and then monitor intensively without necessarily guaranteeing results. CoD is an interesting idea, I cannot say whether the book is interesting but I suspect so.

PS There are many books on my desk that are unread but about which I feel no guilt.

You might think that with ten fingers, decimal or perhaps base 5 or 20 would be the only feasible bases in human culture. Not so:

The Yupno… have a counting system that enumerates the nostrils, eyes, nipples, belly button and climaxes in 31, for ‘left testicle’, 32, ‘right testicle’ and 33 ‘penis’.

Women of the Yupno tribe would not answer researchers’ questions so it is not clear what number system they use.

Counting systems can also become very elaborate:

In the eight century the Northumbrian theologian the Venerable Bede presented a system to count to a million, which was one part arithmetic, one part jazz hands… higher orders were expressed by moving the hands up and down the body – with a rather unpriestly image to represent 90,000: ‘grasp your loins with the left hand, the thumb towards the genitals’, Bede wrote.

I am well aware of the date but this is no hoax, but instead an extract from the first chapter of “Alex’s Adventures in Numberland” by Alex Bellos – or Alexander, as a numerologist strongly advises. The first chapter also discusses whether animals can count, explains that numbers have different qualities (ordinality and cardinality pose different challenges to chimps), and examines remote tribes with no words for “five” or more. Every page was a revelation.

The second chapter is about geometry and is not nearly so interesting but is still pretty good. It includes an explanation of the origins of the term “hypoteneuse”, so what’s not to like? I strongly suspect that the book would have been well worth buying, had the publishers not sent me a free copy anyway.

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".
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