Tuesday, September 29, 2009

Game Theorist: Paying to sit next to your children

Game Theorist: Paying to sit next to your children

Backwards Pricing...

Apparently British Airways is now planning to add a surcharge for parents to sit next to their children... This is a perfect example of a company that got the pricing backwards.

Joshua Gans an Economist from Australia (and the author of Parentonomics) makes note of the pricing and immediately points out that the system is perfect for him to game -- allowing him to save money, and offload the responsibility for managing his children's behavior. See his take here: http://gametheorist.blogspot.com/2009/09/paying-to-sit-next-to-your-children.html

A majority of the Commission have children, and all of us have had the uniquely painful experience of flying with other people's children nearby...

Thus, we feel that BA got this completely backwards. While passengers may not want to admit it, given the opportunity to pay more for a seat that had no children nearby -- particularly none in the seat behind them, with their seemingly limitless desire to kick -- they most certainly would pay more. In fact, depending on the route -- any flight to Orlando, FL comes immediately to mind -- passengers without children might be willing to pay nearly double to fly without children nearby...

Yet under the British Airways plan, parents will be given an incentive inflict their children on other fliers, unsupervised...making other passengers' flights less pleasant as well. Score another one for Virgin Atlantic...!

Tuesday, September 22, 2009

Vanuatu, We Hardly Knew Ye

It seems a safe bet nobody will be naming an island in the Maldives after our Only President. Faced today with a world stage and the possibility for a real statement on how the US would pitch in to arrest the advance of rising CO2 and sea levels, we said developing nations needed to do their share. That's like the pot calling the kettle carbon-stained.

Here's a news flash--developing nations don't need to set up coal-fired utilities; that step can be skipped over, and the utility infrastructure built on renewable energy and distributed generation grids. Here's another news flash--people in these countries may have sex. Occasionally, that sex may produce offspring. Always, however, those offspring will require resources to survive. How about we take those ACORN dollars and turn them into contraception education and resources? Instead of teaching the next generation of Don Magic Juans how to evade The Man, we could help developing nations keep their population growth from outstripping the evolution of their infrastructure. Or maybe--just maybe--we could take a look at our 20% of the world's production of CO2 and ask ourselves why we can't keep up with China. Mao has to be laughing his ass off right about now--it was his idea to make those little hats recyclable.

If you think global warming is a myth, that we can beat on the Earth like a drum with no repercussions, that's fine. However, do you really want to take the risk that someday downtown Cleveland could be oceanfront property?

The problem is that we believe correcting our climate impact is directly tied to our economy. It is--it is directly tied to our current economy. We've got an economy that looks like a three-car pileup, unemployment numbers that refuse to shrink, and a populace that thinks the vast majority of its leadership isn't up to the task--and that goes for both sides of the aisle, in every State, and in both Houses of Congress. If we keep thinking inside our current box, all we're going to wind up with is the same stale ideas.

America works best when Americans work. It's time to resurrect the WPA--only this time, they'll build geothermal plants instead of buildings, windmill blades instead of monuments, and solar panels instead of highways. Let's face it--Americans need their pride back. Whether it's returned by soldering together a solar array or by harvesting pond scum to make synthetic fuel, it doesn't matter--it just needs to make a return, and swiftly.

Before the waters rise any higher.

What "Everybody" knows about the US Healthcare system...

Now this may come as a shock, but the Commission is not against improving our Healthcare system, and is in fact open to a number of the changes that are being suggested...

But the root of the 108Warren Commission is skepticism... and the Commission is always skeptical of things that "everyone knows are true."

"Everyone knows" that European Healthcare is better than what we have here in the US -- if you have any doubts, just look at life expectancy -- a kid born today in the US has a shorter life expectancy than a child born in most of the European countries, and Japan too.

Now comes word in the New York Times (of all places) that maybe what "Everyone" knows about our healthcare being worse than Europe's might not be accurate after all...
...a prominent researcher, Samuel H. Preston, has taken a closer look at the growing body of international data, and he finds no evidence that America’s health care system is to blame for the longevity gap between it and other industrialized countries. In fact, he concludes, the American system in many ways provides superior treatment even when uninsured Americans are included in the analysis.

Apparently the fact that America has a significantly more diverse population, and until recently lead the world in cigarette consumption for decades, has far more to do with our health outcomes than the quality of our healthcare...

Maybe we should take a closer look at some of the rest of the things that "Everyone" knows about our healthcare system before we make any final changes... Sometimes it really is worthwhile to go back and check the facts...

Friday, September 18, 2009

Too many topics for one day...

Sometimes there are too many topics to write about. Here are a few that have caught our eye just today...

Having not completely bought the argument behind Wikinomics, the Commission was heartened to see "The Dirty Little Secret About the "Wisdom of the Crowds" - There is No Crowd," which correctly points out that small groups of people create most of what is commonly called "Crowd-sourced..." Key point: 1% of Wikipedia users are responsible for half of the site's edits.

Rick Woldenberg is continuing his fight to bring some semblance of common sense in the application of the CPSIA, and maybe getting some few folks in Congress to reconsider their actions... this week, he sends some simple questions to the new Chair of the CPSIA. At least he is keeping his sense of humor...

Yet Congress didn't learn from the CPSIA experience, and now we are seeing more "unintended consequences" as a result of
the new "Home Valuation Code of Conduct" (HVCC). Another law intended to help consumers is going to raise costs and lower value...

Of course Congress is not the source of all our problems. Sometimes it seems that the record companies, the artists, and the consumers are working together to kill the music industry. One blogger's solution -- Ban all music... The Commission is pleased to see that Modest Proposals are still in vogue.

Lastly, the Commission was interested to discover that apparently, and perhaps not surprisingly, having your heart broken increases your risk of a heart attack.

Thursday, September 17, 2009

Studying Conservative Thought...

Regardless of your ideology, the 108Warren Commission urges you all to read Mark Lilla's piece in the Chronicle of Higher Education. In it, he discusses the new UC Berkeley Center for the Comparative Study of Right-Wing Movements.

The lack of inclusion of conservative views from university and college campuses is a poor trend, and limits the opportunity for true education. The fault lies not just on the Left -- modern Conservatives have embraced an anti-intellectualism that helps to perpetuate the problem...

The Commission (a group with a striking diversity of political thought) is not sure that UC Berkeley is serious about this line of study, but there is hope that just as one note can sometimes suggest a melody, this leads other institutions to open the doors to differing political thought...

It would make a positive change to our democratic institutions as well as our social discourse...

PS, the New York Times take is HERE.

Monday, September 14, 2009

The Government's "Next Phase" plan...

The government is unveiling their plan for the "THE NEXT PHASE OF GOVERNMENT
FINANCIAL STABILIZATION AND REHABILITATION POLICIES
."

The Wall Street Journal has it up for viewing on their site. It is worthwhile reading -- if only to see that there has been some real return on the government's spending... at least so far.

Perhaps of more interest is the large series of graphs in the appendices that show how bad it got over the past year...

More on Krugman's "theya culpa..."

The commission wants to give credit where credit is due, and the "theya culpa" phrase came from Alex Tabarrok's very good piece over at Marginal Revolution.

Mr. Tabarrok agrees with the Commission that there is some truth in Krugman's piece that the Commission has been blogging about over the past few days... but like the commission, he finds some pretty fair sized holes in his hypothesis...

It's a good story--not the least because there is some truth to it--but there are also many omissions which cast doubt on the thesis. Hardly anyone wants to recall today, for example, that it was Alan Greenspan who popularized the term "irrational exuberance," in a speech in December of 1996. At the time, Greenspan's remarks were covered around the world and they created a sell off in stocks. In a NYTimes article titled Irrational Exuberance, Louis Uchitelle wrote:

That sort of optimism cannot last; stocks that are too highly priced will inevitably fall, perhaps over a long period, as they did in the mid-1970's. Mr. Greenspan, who is 71, lived through that painful downturn as a top economic adviser in the Ford Administration.

This time, a falling stock market might have a broader impact. Many more Americans own stocks today than in the past, and a downturn could cut deeply into their sense of well-being. The result could be a severe cutback in spending, hurting the economy. For that reason, the stock market has become increasingly important in the deliberations of the Federal Reserve over interest rates -- whether to raise them to slow the economy or lower them to encourage spending and growth.

Greenspan in Uchitelle's piece is the one raising questions about market prices. Furthermore, no economist in Uchitelle's piece says that prices are always correct or that markets are perfectly efficient or that bubbles are impossible--the mainstream view according to Krugman. Robert Shiller is quoted not Eugene Fama. And, of course, it was Robert Shiller who would later author two bestsellers warning of bubbles, another discomforting fact for those who argue that dissenting economists were marginalized.

The Commission suggests that the key is to remember that despite his well-deserved Noble prize, Mr. Krugman is still human, and subject to the same internal biases and political assumptions as the rest of us... The Commission is certain that in his heart and mind, Mr. Krugman understands this, we just wish that he would acknowledge it in his writing once in a while...

As always, the comments below Mr. Tabarrok's piece are worth reading -- Marginal Revolution's regular readers are remarkably well informed, and even when disagreeing with each other, offer great information.

Tuesday, September 8, 2009

Following up on Economic Navel Gazing...

Arnold Kling over at the Library of Economics and Liberty does a nice job of re-casting the discussion of economic theory that Krugman started in his piece...

He puts together a good Recalculation story to describe the current economy...it hits a number of good points...

The discussion in the comments section below his piece is even more worthwhile...

It is absolutely worth reading: http://econlog.econlib.org/archives/2009/09/the_recalculati.html

Friday, September 4, 2009

Economic Navel Gazing...

PAUL KRUGMAN has a new piece up on the NYTimes website on new debates within the Economic community springing from the economic meltdown.

Krugman can be tough to take -- in fact some members of the Commission find his smug certainty that he is always right, and significantly smarter than everyone else in the room almost intolerable -- but this piece is definitely worth reading.

There are a number of telling points in the article dealing with the fact that most economists never even saw the possibility of the current recession...

stocks and other assets were always priced just right. There was nothing in the prevailing models suggesting the possibility of the kind of collapse that happened last year.

As a result of this failure, Krugman sees Economics returning to Keynesian thinking - which of course coincides nicely with his increasing support for Government intervention in the economy...

Krugman uses as an example a true story of a babysitting co-op in Washington DC:


This co-op, whose problems were recounted in a 1977 article in The Journal of Money, Credit and Banking, was an association of about 150 young couples who agreed to help one another by baby-sitting for one another’s children when parents wanted a night out. To ensure that every couple did its fair share of baby-sitting, the co-op introduced a form of scrip: coupons made out of heavy pieces of paper, each entitling the bearer to one half-hour of sitting time. Initially, members received 20 coupons on joining and were required to return the same amount on departing the group.

Unfortunately, it turned out that the co-op’s members, on average, wanted to hold a reserve of more than 20 coupons, perhaps, in case they should want to go out several times in a row. As a result, relatively few people wanted to spend their scrip and go out, while many wanted to baby-sit so they could add to their hoard. But since baby-sitting opportunities arise only when someone goes out for the night, this meant that baby-sitting jobs were hard to find, which made members of the co-op even more reluctant to go out, making baby-sitting jobs even scarcer. . . .

In short, the co-op fell into a recession.


What Krugman ignores by using this story is that the co-op members self selected to join the group, and therefore had common characteristics that made it a structurally inefficient economy. Babysitting is not generally an occupation that parents would choose to do, and the fixed exchange rate of the currency does not create enough value to overcome the inherent challenges in getting parents to do additional babysitting in trade for future babysitting.

While the Commission is happy to see Economist begin to appreciate that not all markets are perfect, and not all individuals make "rational" decisions, it is is not excited by calls to return to pure Kaynesian thought. In the Commissions view, Keynesian thought discounts the Externalities caused by government intervention in the economy, and those externalities played a big (but almost universally ignored) part in the lead up to the economic collapse.

While the Commission does not agree with neo-classical economists that unemployment is driven by people making a conscious choice to work less.... it does recognize that government policy has created some of the joblessness...

By relentlessly advocating increased home ownership and failing to encourage citizens to understand the trade-offs that come with owning a home, it played a large part in causing the bubble... Government policy ignores the fact that owning a home makes it much harder to move to find a new job. In fact, through action at the local, state and federal level, government encourages people to think that they have a pre-ordained right to have a job in the community of their choice. Through advocacy, government has created an entire cadre of irrational consumers, as well as fundamentally irrational markets in employment and housing...

Mr. Krugman would ignore that fact, and advocate for increased government action.





Fear and Loathing In Jersey

Watching elections in Jersey is akin to rooting for the shark in Jaws. You know he's going nowhere, but there's going to be a swath of destruction left in his path before he's gone. Since we somehow got rid of the concept of anarchy, it also appears that we are doomed to watch the movie forever, like cockroaches trapped in a B-movie Hell.

Elections have become the stuff of legend, and not in a good way. Behind in the polls? Announce your opponent did a little side deal with a subordinate. If the story's not strong enough to clear a news cycle, drop hints about the possible 'intimate' nature of their friendship. Don't feel you're getting your points across? Start talking about how the other guy screwed everything up, but never mention how you're going to fix things. Want to win the day come First Tuesday? Pay the other guy's street people extra to sit home and watch reruns of Gunsmoke.

To answer the Torricelli question, we became an unforgiving people when we became an uninvolved people. Machines take over the daily labor tasks once done by hand; computers make even the worst typist not have to worry about running out of white-out or bond paper--every moment of our lives focused on producing more with less effort. On a deeper level, that has infected our daily thinking--why look for substance when the 60-second spot damns the other guy without really saying anything? The commercial serves as the dishwasher for the analytical part of our minds--it does the work researching the candidate, so you don't have to.

Give me the guy swinging an ax, not a chainsaw, to fell a tree. Give me the craftsman building a desk, not the factory worker manning the milling machine. These are the people who built America--men and women not afraid to have their brow sweat and their nails chip. People who knew that a representative democracy meant that they needed to elect somebody who represented them--someone hardworking, who understood what it was like to go without, and was grateful for what they had earned. People who took the time to see who they were electing for themselves, not just passively listen to a voiceover dripping with venom rail on about the inadequacies of their opponent.

For too long, we have accepted the status quo as mental pablum. Well, no more. This year, the choice is simply to 'four-get'--get up, get working, get thinking, or you'll have nobody else to blame when you get stuck with someone who, unfortunately, has the gravitas of a cheeseburger.