Jul

26

Should I leave Australia?

by Joshua Gans | Filed Under Economics | 7 Comments

It is hard to watch the current ‘population’ debate in Australia, be overseas and not think about that question. Let me put it more specifically, if I am nationalistic towards Australia, should I consider remaining overseas and not returning? In particular, what is the logical answer to that question if I am to believe the general arguments put forward seemingly by both major political parties — albiet one more starkly stated than the other.

To begin answering this question let me state a few axioms from which to base logical consequences. First, I’ll assume the goal is the welfare — happiness, economic prosperity, etc — of all current resident Australians in some sort of aggregate — the nationalistic assumption. Second, I’ll assume that I am not allowed to base my decision on my own economic circumstance and also on the ‘economic contribution’ I might make to Australia in the future — this is the no-economic discrimination assumption that I see politicians as making. Those two should do it.

Now what are the criteria we should use to consider the value of my absence? For one, let’s start with the ‘burden on public infrastructure’ argument. Well, there I am a clear liability. I consume all manner of public infrastructure but, in particular, I consume education resources — and here I am assuming that if I leave, another adult and three school age children will leave as part of the mix (call it a household family emigration policy). While you might say that as an Australia who pays more than the average in taxes, I should take that into account I need to remind you that that would be an economic factor and so I can’t take that into account. My absence would free up resources.

Second, let’s consider what one might call the ‘Western Sydney’ argument. This is the argument that some localities are suffering more from immigration and over-population than others. Well, I don’t live in Western Sydney nor (I’m pretty sure) whatever someone might define as the Melbourne equivalent. So you might think that I am off the hook there. But not so. If I leave, that will free up one house elsewhere that one of the families from the over-populated regions will — through a chain of movements — eventually claim. So long as we leave the country, we are creating the potential to reduce the congestion issue whereever it might be.

Third, my environmental impact. Well, that is surely a disaster; I’ll not pretend otherwise. So if I were to leave that would be a reduction in any future emissions goal. That said, this argument I should not is a fallacy anyway since it is only an improvement to the world problem if I move somewhere that allows me to emit less. Hard to see how I can guarantee that.

Finally, there is the ‘cultural fit’ issue. Now from what I understand that comes from my willingness to partake in Australian culture in all of its forms. Well, it is hard to judge that obviously but let me give you a few bits of information and let you decide whether on that basis I would be cleared for fit from our mainstream politicians. For one, I don’t drink. Not at all. Nothing. Second, I don’t watch sports. I used to watch cricket but no longer have the time and I have lived in Melbourne for 14 years and have never been to an Aussie Rules match — not even for the children. Lastly, I’m an economist.

Near as I can tell, if I accept these arguments as to why we should have a small population as both major parties seem to be arguing, then the logical consequence is that, for the good of the country, I should leave. And I have to say that hearing the current arguments and their flawed moral logic, that thought becomes easier to contemplate.

Jul

23

The social information ideal?

by Joshua Gans | Filed Under Economics | 2 Comments

In a carefully choreographed launch, a new iPad ‘social magazine’ app called FlipBoard was released. I say it was choreographed because there were several key ‘influencers’ who released reviews simultaneously with gushing testimonies (here’s one). As it was free, I downloaded it to see what the hype was all about. Read more

Jul

22

Want to know more about market design?

by Joshua Gans | Filed Under Economics | Leave a Comment

Take a look at this week’s Forbes.

Jul

20

You can’t go wrong with ‘dynamic’

by Joshua Gans | Filed Under Economics | 1 Comment

[HT: Scott Stern] Richard Bellman — of the famous Bellman equation — recounts how he came up with the name ‘dynamic programming’

An interesting question is, ‘Where did the name, dynamic programming, come from?’ The 1950s were not good years for mathematical research. We had a very interesting gentleman in Washington named Wilson. He was Secretary of Defense, and he actually had a pathological fear and hatred of the word, research. I’m not using the term lightly; I’m using it precisely. His face would suffuse, he would turn red, and he would get violent if people used the term, research, in his presence. You can imagine how he felt, then, about the term, mathematical. The RAND Corporation was employed by the Air Force, and the Air Force had Wilson as its boss, essentially. Hence, I felt I had to do something to shield Wilson and the Air Force from the fact that I was really doing mathematics inside the RAND Corporation. What title, what name, could I choose? In the first place I was interested in planning, in decision making, in thinking. But planning, is not a good word for various reasons. I decided therefore to use the word, ‘programming.’ I wanted to get across the idea that this was dynamic, this was multistage, this was time-varying—I thought, let’s kill two birds with one stone. Let’s take a word that has an absolutely precise meaning, namely dynamic, in the classical physical sense. It also has a very interesting property as an adjective, and that is it’s impossible to use the word, dynamic, in a pejorative sense. Try thinking of some combination that will possibly give it a pejorative meaning. It’s impossible. Thus, I thought dynamic programming was a good name. It was something not even a Congressman could object to. So I used it as an umbrella for my activities (p. 159).

I think the same might be said of ‘forward.’

Jul

19

A couple of stories

by Joshua Gans | Filed Under Economics | Leave a Comment

A few weeks ago two of my friends (on the same day in fact) shared some lengthy stories that, while not about economics, are worth the read. Here is Shane Greenstein on his trials with bacteria and here is Chris Joye on his trials with international espionage.

Jul

19

Lasers and the NBN

by Joshua Gans | Filed Under Broadband | 4 Comments

I’ve been generally supportive of the idea of a government push to build a real high speed telecommunications network across Australia. I’m not sure whether they will get there with the social benefits intact but very early on it was clear that the wired versus wireless technology choice was a tricky one. I advocated a market design (yes, a market design) that did not specify technology by benchmarks and rewarded providers for connecting up Australians. The reason for not specifying the technology was because I think it is generally better for the market rather than the government or monopolists to decide these matters.

As a case in point look at this post from Robert Scoble. It discusses lasers, yes lasers, as a potential broadband technology that avoids having to lay down cables. I have no idea if this is feasible but what I do know is that if it is the NBN as it is currently being envisaged is not going to look too great a decade from now.

Jul

19

What is market design anyway?

by Joshua Gans | Filed Under Economics | 1 Comment

This article by David Uren has got some international attention. It is about Per Capita and its potential influence on our new Prime Minister. The particular bit of interest is the idea of “market design.”

The idea of “market design” is a key theme for Per Capita. Governments have always had a role in setting the rules of conduct for markets through trade practices. Per Capita argues that with due government guidance, markets can perform a powerful role in delivering human services, such as the jobs network.

This prompted a question from, arguably, the founder of market design as a field in economics — Al Roth — who asked me whether what they mean by ‘market design’ in Australia was the same as what they mean at Harvard. Well, as with all concepts, there is a danger it might be used to justify anything but my impression was that the concepts were supposed to be the same. That is, market design is the careful evaluation and commitment to rules and procedures to ensure that otherwise undirected economic agents choose socially efficient outcomes. In particular, it involves using the hard headed techniques of game theory to propose rules and to back these up with experimental, field or trials to ensure they work as intended in practice.

I have attended Per Capita’s annual conference on two occasions. At the first, I actually talked about Roth’s ideas regarding market design and I think that talk went over well. The second was more wide ranging but about design in the face of financial crises. Sadly, I won’t be able to attend this year.

Jul

19

Economic consensus, tell him he’s dreaming

by Joshua Gans | Filed Under Academia, Economics | 10 Comments

A week or so ago, I reacted to this piece by Ross Gittins that I thought may have implied that I was anti-action on climate change. I was wrong and that was not his interpretation but it was an issue I was sensitive on as I had gone out on a limb in the past to support the Government’s proposed actions on climate change (see here and here) even as most others had moved their support away. I did something that I rarely do and pulled the post.

Today, Gittins was back with another swipe against academic economists. The thesis this time is that the “lack of consensus” amongst Australian economists on how to implement climate change policy led to its downfall. Gittins is careful to note that some did support the Government’s plans but was scathing in his conclusion:

Parkinson concludes that economists’ lack of agreement on key implementation questions renders their preference for a carbon price signal largely meaningless in practice. In fact, it undermines public support for least-cost solutions. Well done.

The article recounts the Secretary of the Department of Climate Change’s view of why economists disagree. The possible reasons for this are (a) environmentalism has become synonymous with anti-growth (although that reason doesn’t quite wash to cause lack of agreement); (b) economist’s can’t evaluate catastrophic risk (well, who can do that well and in any case, I am pretty sure they can); (c) economist’s have a strong preference to leave things to the market; (d) they prefer perfection rather than a good compromise. Of these reasons, only the last has anything to do with disagreement on how to implement climate change policy. And even there it is arguing for agreement just agreement that the Government wasn’t on the right path! Oh and by the way, where are the perfection arguing economists in this debate. Could someone please name one and point to a few public words to that effect? Just one! I’m not even looking for The One who has supposedly de-railed current policy.

In any case, trying to work out why economists disagree is hardly practical. Indeed, it is lamenting an ideal view of public debate that policy-makers pine for but can’t have practically. Surely, we need to take it as an axiom of public policy implementation that economists will disagree.

Now, here is the thing, if it is an axiom, then it falls back on the policy-makers to work out what to do about it. My guess, given all of these discussions, mainly from public servants, is that in days old, public servants were the ones who did the job of translating academic economist opinion for politicians. There were few other paths by which academic economists could engage in policy debate and all of them were so costly very few bothered.

Today, that isn’t the case. Any defunct economist with a computer can hit ‘publish.’ The amazing thing for me is that this actually is mattering. I imagine that the politicians are being given the published arguments and that within the internal workings of government this is making the public servant’s job harder.

The right reaction to this is not to criticise the lack of agreement amongst now visible economists in public speeches. Instead, it is to work out how to engage with the new process. Public servants need to recognise it is there and come to meetings armed and ready to deal with it rather than, perhaps (and I don’t know if this occurs), dismissing them as the work of cranks. They need to be proactive in engagement, talking to academic economists who are likely to comment prior to policy releases. Work out how to explain the practical constraints earlier on. It is a new task to be sure but it reflects what seems to be a new reality.

And there are other ways of doing this. We economists don’t like to see public debate moved by politics rather than sensible discussion. That is why we organise conferences and certainly why we organise petitions to demonstrate large support when it exists. Others, in particular Warwick McKibbin and CEDA, have led moves to organise economists to collate policy debates in a more usable form. These moves require Governmental support to continue — and not in money but attention. Per Capita has been one think tank that has been doing this but more on that later.

Finally, perhaps this is the very charge that some budding young politician who might have some academic cred might be able to get behind and cut through.

Update: Over the fold is one of my favourite scenes from The West Wing. Josh has been sent out to sell free trade but they keep him in the dark over potential job losses in the short-term. He finds out and is upset. The episode is entitled Talking Points and is about how economic policy is sometimes just hard to sell. Read more

Jul

17

Only one choice

by Joshua Gans | Filed Under Economics | 14 Comments

I think there is only one choice in this election; Labor. Let me go through issue by issue:

  • The economy: Australia missed the recession. Was it due to the Government or to luck? Hard to tell. The point is that it would have been very easy to have stuffed up with economic management and have blamed it on the world. The fact that that did not happen is amazing and, if ever a Government deserved some credit for good economic management, it is this time.
  • Immigration: I can’t say that the new Gillard direction on immigration is inspiring much confidence but the politics of this issue suck. The point here is that the Liberal Government in its current ‘old hat’ conservative guise (as apposed to ‘new hat’ liberal guise we briefly saw with Malcolm Turnbull) cannot be trusted on this issue at all.
  • Science: the Government, like so many before it, has failed here. But no one else is proposing anything better so it is a wash.
  • Competition policy: the NBN policy was looking good but the deal with Telstra is a big worry. That said, the issue is not with the politicians at the moment but the ACCC so it is not decisive for the election.
  • Censorship: the Conroy Internet censorship plan will not go away. Again, though, no other party is willing to make this an election issue.
  • Financial system reform: the clear big issue facing us is the need to review and make sure we future proof our financial system. Amazingly, no party has taken the charge on this so we languish.
  • The environment: this is the big issue that will not be resolved at all by the election. That is the Prime Minister’s fault. But I note that John Quiggin is likely to advocate a vote for The Greens on this issue. Here is the problem with that: it is the Green’s fault that the CPRS was not passed. The Greens blocked the only move forward that had been proposed ever! Had they been supportive the Government could have bribed one of the independents or, let’s face it, a Liberal or two may well have crossed the floor. They didn’t and now we don’t have climate change policy for at least 3 more years. How can anyone vote for a party that would let perfection be the enemy of the good in such a blatant manner?

There are other issues: health, tax and education but I can’t be bothered to write about them. So, looking at the above, we either have reasons to support Labor or complete indifference amongst all parties. Had Malcolm Turnbull still been at the head of the Opposition, this would have been a much harder choice. But then again, had he been there we would have had climate change policy.

I have to admit that I am not inspired by this election (although I would by much happier about expending the costs involved in casting a vote if I lived in Canberra). In the past when I have felt this way I have let one of my children determine what I should vote. That led to a vote for The Greens in a previous Victorian state election. But I know what my 11 year old daughter will want me to do: this time, she will want me to vote for Australia’s first woman PM so we can see how she does. And so that is what I will do.

Jul

17

Is this what’s changed?

by Joshua Gans | Filed Under Economics | 3 Comments

All through the twitter coverage of Steve Jobs’ press conference, I wondered what would have happened if this issue had emerged with the media as it was in 2000 or 1990. Users may have noticed the antenna issue. Random ones may have brought the issue to the attention of media outlets but it would have taken more than 22 days for it to have become a story. In that time, Apple could have adjusted the problem and also, given away free cases — not as an apology as they have now — but as a promotion. The marketing issue would never have emerged.

But that didn’t happen. Thanks to the Internet, the problem flared up in 22 minutes (I’m being poetic here). It was too quick for the company to react with a counter-strategy by stealth while that issue simmered in the media for all that time. Had Apple done what they had done to react today — namely, a fix of the algorithm and free cases — without anything else, their reputation would be damaged. The Internet changed what they had to do.

And what they did was provide information. They told us about their own investigations, data from AT&T and so on. Pretty much all of the information is verifiable and the verification process will be public. But not to admit fault was no longer an option for Apple. And not to be ahead of the game — to some extent — on data provision was not an option for them. The new media has brought with it, the end of stealth and patience as a business strategy in the face of a quality issue.

But what is interesting is that their competitors are now on the back foot. They were silent and now Apple has challenged them with their own antenna issues that others will verify. In the past month, they could have come out with this first and preempted Apple but they did not. And what is more, I reckon iPhone cases sell more than other smart phones. I’ve never see a Blackberry with a case. What bodes for them now? I think a bit of ‘raising rivals costs’ has occurred.

[Update: It looks like the great Scott Adams (of Dilbert fame) agrees with this.]

Jul

17

Outsourcing fail

by Joshua Gans | Filed Under Economics | 3 Comments

… or win, depending on your perspective. From the WSJ:

Billy Raye, a 51-year-old unemployed bike courier, is looking for work.

Fortunately for him, the Mid-Atlantic Regional Council of Carpenters is seeking paid demonstrators to march and chant in its current picket line outside the McPherson Building, an office complex here where the council says work is being done with nonunion labor.

“For a lot of our members, it’s really difficult to have them come out, either because of parking or something else,” explains Vincente Garcia, a union representative who is supervising the picketing.

So instead, the union hires unemployed people at the minimum wage—$8.25 an hour—to walk picket lines. Mr. Raye says he’s grateful for the work, even though he’s not sure why he’s doing it. “I could care less,” he says. “I am being paid to march around and sound off.”

Kudos for the union’s efficiency drive. What next? Anti-globalisation movements hiring workers in India to staff call lines?

Jul

16

Time to give priority to the urinal issue

by Joshua Gans | Filed Under Economics | 9 Comments

If there is one thing I know attracts a great deal of interest on this blog is when I feel its time for another urinal post. As I know from my popular economics book — the only one in existence to include a full chapter on toileting — no issue commands more interest than ones in this area.

So it was with delight that, on no less an media outlet than the BBC, that the issue of ‘Potty Parity’ was given prime billing. It appears that John Banzhaf, a law professor at GWU, has led a push to bring equality to public bathrooms in the US. As I raised in a previous post, there is a complex issue of the allocation of space as well as the queuing problem in bathrooms. From experience, we know that women have to queue more than men and so incur waiting costs. These waiting costs are different from those incurred by the men outside waiting for the women as we already have done our business; for instance, men could avail themselves of this iPhone app while they wait. A straight economics perspective would suggest that there is an imbalance in the allocation of facilities between men and women and Banzhaf’s mission is to restore some fairness. Read more

Jul

13

Antitrust and Apple

by Joshua Gans | Filed Under Economics | 4 Comments

Once indication of when a company has ‘made it’ is when they start to be the target of antitrust attention. A couple of years ago, Google entered that club and now Apple looks set to follow.

Apple is facing two antitrust accusations. First, there is its exclusive deal with AT&T. This was a deal inked prior to Apple even entering the phone market but we should recognise that, on its face, it hinders consumer choice. Of course, that is not the antitrust standard. The question is whether it damages competition. Now normally an exclusive deal can do that by allowing one firm to extend its monopoly position into related markets — in this case, it would be Apple and AT&T locking up the iPhone so that other networks will be driven from the market. Notice that it isn’t about other phone makers being driven from the market as AT&T still sells other phones — so exclusivity is one-sided. Now AT&T’s market share has grown but it hardly looks like other carriers will be driven out of business or crimped anytime soon. Indeed, I would say that the general consensus is that the main harm from this deal has been to Apple itself. In other countries, I suspect that the iPhone market share is much higher where there is no network locking of iPhones. The point here is that it is tough to define a market where Apple has dominance let alone a monopoly. It isn’t the mobile phone market (Nokia still is the largest). It isn’t the smart-phone market (where at least in the US Apple lags both RIM and Android-based phones). The only market it is a monopoly in is the market for iPhone. Now while I, for one, will accept no substitute, you will only need to look at the comments (I am anticipating) to see that that is not a shared view and maybe, not a widely shared view. A monopoly for a market defined so narrowly around one company is a monopoly by definition but that is hardly the standard for antitrust analysis.

The second claim is on the access to the iTunes App Store and by virtue of that access by developers to being able to sell iPhone apps. Apple controls that access and sets its own criteria — criteria that likely are not universally shared. It also appears to limit access by apps that compete with its own functions; although those functions are ones it gives away for free. Moreover, apps need to satisfy Apple’s pricing terms. But is this illegal monopolisation? The question again is what market does Apple have a monopoly or substantial market power in? The best candidate is that there is a market for application distribution and use and that Apple has a large share of that platform. Now it still lags both Android and RIM for installed base on such platforms but it does appear to have the largest revenue. But that does not necessarily equate to market power. Could Apple, for instance, raise all app prices by 5 percent and find that profitable? It is highly unlikely. While its installed base of current iDevice users would not be able to substitute out, it would face a terrible time competing for new consumers and renewals. This is probably why Apple has not done this even as its installed base has grown. But even if Apple has substantial market power here, there remains the question of its rights to set terms. One issue is that it set those terms at the beginning — well, before it had, by definition, a market, let alone market power — and it has not changed them since. It has only added features. If it took features away, at the very least, we could start to consider whether there is a case against them but that hasn’t happened and nor does it look like it is going to happen.

Jul

9

Asylum seeker FAQ

by Joshua Gans | Filed Under Economics | 2 Comments

A couple of days ago I proposed outsourcing the task of screening asylum seekers for legitimacy by (i) accrediting aid or other non-profit agencies with screening functions; (ii) requiring asylum seekers taking that route to be accompanied by a sizable fee (likely to be paid by the accrediting agency and their contributors); and (iii) still preserving whatever current arrangements the Government has for humanitarian entry on a fee-free basis. The idea here is the channel a new engine of social entrepreneurship to solve, what is on the stats as, a manageable issue. As often is the case with a relatively half-baked idea, there were a few questions raised about how this would work. I’m going to try and answer  some of them here.

Question 1: Don’t the asylum seekers already pay a ‘fee’ to people smugglers? Yes, they do but it is hardly an above-board contract. We would never let Australian consumers pay those amounts for such shonky arrangements. The idea here is the provide a legitimate and, therefore, safer route to advance in the queue based on legitimate criteria.

Question 2: We already have a business migration program with a large fee to jump queues. Why not just extend that and lower the fee? That perhaps is a good idea. What I was trying to do was to focus on the political refugees rather than the wealth of other reasons people would like to migrate to Australia. So I kept the proposal to that but this is not a critical part.

Question 3: Surely, the asylum seekers can’t afford the fee? I agree, that is why the idea here is to get others to pay the fee for them. The idea is to give someone an incentive to screen for appropriate reasons to allow someone to jump the queue. If you have to pony up cash and account to your contributors, my guess is that you will want to pay for migrants with the right profile.

Question 4: Why have the fee at all? We already have a fee-free process and that isn’t doing the job — not enough to stop people risking their lives and fueling crime. The economist in me likes to tie scarce rights (in this case, queue jumping) to a real cost to make sure the screening function is performed. Personally, I’d favour a free process altogether but recognise that the politics are far from supporting it.

Question 5: Isn’t this already occurring? Actually, it may well be and I confess, my assumption was that it wasn’t because of the fact that the Government doesn’t talk about or promote it. One accrediting agency already in existence is UNHCR but I don’t know too much about it.

Question 6: Who cares about people smuggling? Did anyone put a gun to the passengers’ heads and force them onto the boat? I think that is precisely the point. They did put a gun to their head. It is precisely because we love political freedom that we support people in trying to exercise it and flee oppression. (And, yes that was a question, see the comments here).

Jul

7

Understanding the asylum seeker debate

by Joshua Gans | Filed Under Economics | 15 Comments

What a mess asylum seeker policy appears to be. I say, appears, because there has been so little clear articulation of what it is in the context of other options that existed. To proponents, it is all about looking ‘tough.’ To opponents, it is all about a disproportionate response with high costs in terms of moral authority. It is just hard to know what to make of it all.

What I want to do here, and I am not sure how far I’ll get in a single post, is to try and understand the policy trade-offs and also the constraints on policy choices. But I will start by being upfront about my position on immigration. Immigration is undoubtedly a good thing — both for society and the economy. I think of the freedom of the movement of people to be as desirable, if not more so, than the free movement of goods and capital. It is the ultimate in respecting that people have different views and aspirations and that their lives may be more suited to one region or culture than another. My only caveat comes from the notion that short-term crises can cause mass migrations and that it may be better for everyone concerned to manage those incidents in a coordinated fashion (although I note that the case of Israel and migration after the fall of the Soviet Union demonstrates how it can be done). Read more

Jun

30

Farmville and addiction

by Joshua Gans | Filed Under Economics | 2 Comments

I have a confession. For the last month or so I have been playing ngmoco’s GodFinger. It is an addictive iPad game that has you build a world and move up in levels. Other than that it is boring as all hell with no cognitive processes required. But it did have a social element. A good friend of mine was also playing it and you could exchange gifts and see how you were going. The game pretty much required it. But we kept asking ourselves: “why are we playing this? It is so stupid.”

I’m happy to report that I am now off (on?) the wagon. I reached the maximum level in GodFinger (level 50) and then committed to stop by killing and destroying everything I built. The picture to the side shows the Armageddon. My friend continues on in the hope that ngmoco will add more levels.

GodFinger is of course, small potatoes. The big game is Farmville. Farmville has 26 million daily users — more than any other game. I joke that the daily harvested crop take on Farmville exceeds the daily agricultural output on the United States. It is the biggest shift back to the agrarian society ever. The new iPhone version makes harvesting even easier so I suspect the measured ‘productivity’ of the world is about to increase significantly.

Farmville is on its level an insanely pointless game. Here is a description. Read more

Jun

29

Blogging and researching

by Joshua Gans | Filed Under Academia | 6 Comments

In what seems at least uncharacteristic of a research economist in a Central Bank, Kartik Athreya [Updated link] as written an opinion piece (or if it were on a blog, a post) criticising economics opinion writers and bloggers. The one thing that is certain is this creates a big target for economics bloggers to re-criticise.

In reading this, Athreya is clearly frustrated. Economists are supposed to lay out assumptions, draw logical conclusion and debate the evidence before commenting on policy. The blogosphere doesn’t do that. In Athreya’s opinion, it is because (a) they can’t or (b) are scientifically dishonest. Apparently, this is not meant to offend but really. Read more

Jun

25

Cupertino, we have a problem

by Joshua Gans | Filed Under Economics | 2 Comments

So there are reports today of a problem with the iPhone 4′s antenna. If you hold the phone with your left hand (as I do when talking on it), the ‘bars’ drop from 5 to 3 or 2. I tried it and much as it pains me to say it, it’s happening and is easy to replicate. It seems that the issue is covering the bottom left side of the iPhone’s edge. You hold it for about 5 seconds and watch the apparent reception quality drop off. I haven’t experienced an actual call issue so who knows what it means but this doesn’t look good. You would think that all the Apple engineers in bars might have noticed it.

[Update: tested it with a 'bumper' case and there is no issue. Me thinks Apple may have to provide them as part of the deal.]

Jun

25

Interview on BNet

by Joshua Gans | Filed Under Economics | Leave a Comment

I did a quick interview this morning on BNet on the role of academics in policy-making. Caution: may be a little rambling.

Jun

24

Missing Markets in the iPhone Line

by Joshua Gans | Filed Under Economics | 1 Comment

As I stand here in the iPhone line it is clear that entrepreneurship is dead. There are many missed clear market opportunities. First, where is the coffee cart? Second, where is the arbitrage between those with a preordered phone and those without? True on average that shouldn’t exist but given the size of the line there should be some trades to be made.

Finally, everyone here has an iPhone. Surely there is a big opportunity to buy old phones as people exit and arbitrage on eBay or something?

But none of this is happening. Just lots of waiting.

OK two hours later and we are out of the line. Basically, the iPhone 4 is all about the display. I can’t describe it in words. You will just have to see it for yourselves.

Jun

24

The new leadership

by Joshua Gans | Filed Under Economics | 5 Comments

Over 30 hours ago, a 1st round Wimbledon tennis match began. At that time, there was speculation that there may be some discontent in the Labor party over whether Kevin Rudd would remain as leader. The tennis match is still going — the longest in history at 59 all in the fifth set. But the leadership battle was begun, fought and resolved in less time. It must be said that there is something civilised about this all happening without the endless speculation, the failed bids and the years of turmoil. It seems to me that Kevin Rudd deserves an enormous amount of praise for that happening in that way.

Despite the shocking pace of movement, the change in leadership is an exciting one. The Government had shown plenty of signs of falling away at the seams and there can be no doubt that Julia Gillard has been a stellar performer and policy-maker over the past three years. I had the occasion to meet her 6 or so years ago for a lengthy discussion of health policy and reform. While I can’t say that it led directly to anything concrete — the ALP were in Opposition at the time and was to remain there for some time after — I came away with the impression that she was an informed, critical thinker with a genuine desire for evidence that might support what she considered (rightfully) theoretical propositions. There are few politicians that I have met that have left such a positive impression. If the person I met then is the person now becoming the Prime Minister, it bodes well for us all. And if her rise can serve as the inspiration that I already observe from people around me and on social networks, then mores the better.

Jun

23

Henry and the Academics

by Joshua Gans | Filed Under Economics | 15 Comments

You know, you have to believe that Ken Henry really doesn’t understand academics at all when he publicly says stuff like this:

“Whenever an idea is ventured publicly by a person, whether that person is a policy advisor or whether it’s a government minister, there’s at least a handful of academics who will contest it,” he said. “I’ve seen it on both sides of politics – this is not a partisan comment at all – but for governments, government ministers who are seeking to get ideas legislated – it is unbelievably frustrating, incredibly frustrating.”

“It is a great strength of economics as a discipline. It is one of the things that as a young person I found very attractive about the study of economics, this contest of ideas. But I think there are occasions on which economists might, at least for a period, put down their weapons and join a consensus”…

Warwick McKibbin, appropriately sums up the position of we academics:

“I have enormous respect for Ken Henry, but he can’t believe that you should have consensus because it is better to have bad policy that everyone agrees with than eventually get god policy that will work.”

He goes on:

If the government won’t engage you behind closed doors then an academic has no other choice than to express their opinion in the public interest in public for the public to assess.

Warwick, like many, have opposed the Government strongly on many policies. And in so doing, he has added to the debate and in some cases there is arguably success in getting sense put in place. It is tough thing to do and it frustrates me to see it so derided.

But I want to add a few things here. First, let me tell you, praising the Government is as thankless a task as critiquing it. I was someone who fell behind the Government and wanted to get the ETS done and said so publicly in the face of criticism myself. I was someone who fell behind the Government and argued that we should pay attention to the evidence on FuelWatch and give it a go. And I was someone who, after years of critiquing their broadband policy, praised them when they moved in the right direction. And was I ever able to be brought in to help improve these policies (something they could clearly use)? No. Whenever I tried I was given the clear message that there are insiders and there are outsiders. Warwick is actually one of the insiders. I write blogs and occasionally newspaper pieces only to find the Government abandoning those policies that I supported for political and expedient reasons rather than on the basis of evidence. I find myself often wondering these days if it is really worth the effort to write long submissions to Parliamentary inquiries, conduct research in policy-relevant areas and stick my neck out at all only to wake up and find that we are all really just an annoyance anyway.

Second, this is isn’t a problem with just this Government. They are all like this. The Howard Government in the face of the clearest evidence that it was poor policy went ahead with the introduction and then increments to the baby bonus despite the strain that put on maternity hospitals. Where was Treasury then? How could it be that the mistake was made and then repeated two times with ample time and options to get around it? And I will continue to harp on me and fortunately I get to write textbooks so that our students can see what a broken evidence-based policy system looks like.

In the US, I can see that things are very different. The Government consults regularly with outsiders and genuinely solicits advice. I have seen it happen, not just here at Harvard but all over the place. In Australia, the aura is one of distance. Now I am not saying that Ken Henry or anyone else has to engage with me personally. Just being a professor commands no such right. But I would like to see him and the Government actually engage with some outsiders regularly rather than project the image of distance. But regardless, there is surely no right to consensus until the Government has earned it. They have far to go. If asked, I’ll gladly help. Otherwise, I speak my mind from the sidelines.

Jun

23

Winner of Student Contribution Contest

by Joshua Gans | Filed Under Economics | Leave a Comment

After reviewing many entries, the judging panel (i.e., me) has found a winner … David Ong.; an undergraduate student at UNSW. While there were many interesting entries — mostly focused on issues related to the financial crisis — this one spoke to me as being interesting, original and provocative. Congratulations David and thanks to all those who entered.

Jun

23

US Credit Card Act tanks

by Joshua Gans | Filed Under Economics | Leave a Comment

… and Visa and MasterCard share prices rise. That is the news today when proposed ‘Australian-like’ regulations of credit card associations were amended.

The first amendment was that the Fed wouldn’t be able to regulate network charges alongside interchange fees. Actually, that amendment is fairly innocuous as arguably, the interchange fee cap should apply to just that rather than other charges. It is good to see that lawmakers were aware that there was a potential to use other charges as a workaround but that seems adequate.

The big problem with the amendment is that while it allows merchants to discount based on payment instrument — check versus credit card — it doesn’t protect them from card association rules that prevent discounting based on the card brand itself. So if Visa had a high interchange fee relative to MasterCard, the merchant can’t pass on those higher costs to consumers. This means that price signals are distorted but more seriously that Visa and MasterCard can’t compete with one another on that side of the market. There is no point discounting if consumers don’t see it and you don’t get more transaction volume as a result. This means that the interchange fee regulation will do all of the work in controlling the industry. This seems like a heavy handed approach that doesn’t enable a well functioning payments market. Little wonder that their shares are rising as it appears almost akin to (that is functions like) a license to collude.

Jun

22

Continuing confusion on broadband

by Joshua Gans | Filed Under Broadband | 1 Comment

Here is a question: what does duplication mean and when is it bad?

And here is the answer: duplication means building two or more of the same thing where just one would be enough. It is potentially bad when you already have one of those things and you build another. Of course, if by building another, you get say, competition, the benefits from that might offset the costs of duplication.

What relevance does this have to the Telstra-NBN agreement that effectively proposes preventing Telstra’s cable network from offering broadband? The answer is nothing. Why? Because what is being proposed is to incur all of the costs of duplication with not one bit of the benefits.

What is more, no one seems to understand that. Today’s case in point, Robert Merkel (who is singled out for being clear and for referencing me):

Joshua Gans is disappointed that Telstra’s existing networks aren’t going to be competing against the NBN. I’m not; duplicating telecommunications infrastructure to the home makes about as much sense as running multiple competitors’ power or water networks to individual homes and businesses.

What he is saying is that he thinks it is just fine that we shut down (effectively) a perfectly good network and build a new one over the top of it. That is, we duplicate — because we are building a new network — but don’t get any benefits — competition, extra capacity or whatever. If you think duplication is bad when thought about sensibly, how can you possibly advocate the most senseless duplication imaginable?

Personally, while I might have lamented the loss in facilities-based competition, I would have been far less concerned if NBN Co were purchasing the HFC network and then allowing others (e.g., Foxtel) access to it. At least there would be no duplication — well, at least until far into the future when the HFC network was actually obsolete. This proposed plan has no public benefit associated with it.

And while I am at it: we already have a ton of duplication of the cable network — anyone know what happened to Optus’ network?

Next Page →