Twitter: Joshua Gans- @jodiecongirl Actually, it says more about you that you've heard of them!
- @jodiecongirl I think it says that economists don't just assume rational agents but are attracted by them too. Talk about a value conflict.
- @jodiecongirl Why uninteresting? Think of Alex P. Keaton, Quark , Sheldon and Dogbert.
- RT @freakonomics: Freakonomics Movie is released via iTunes tomorrow: http://bit.ly/9YveA3 [I'm gathering the kids for a Friday night movie]
- Am I to understand that we are now in the path of a Hurricane? http://bit.ly/daitO9 This aint the tropics.
Readership
May
31
Insults: where are the new ideas?
by Joshua Gans | Filed Under Politics | Comments Off
So the Opposition Health spokesperson, Julia Gillard, got thrown out of Parliament today for calling the Health Minister, Tony Abbott, a “snivelling grub.” Yesterday, Mr Abbott was not thrown out for saying the exact same insult. Commentators have called it a double standard.
Well sure, it is a double standard. But let me go out on a limb here and suggest that maybe it isn’t a bad thing if the speaker throws out politicians for recycled insults. Yes, I know that Gillard was just being ironic. And that plays well in a sitcom. But what I really want to see is more innovation by our politicians in insults. It is critical for the entertainment function that is central to our democracy. In fact, that was what the Labor Party of old was really known for. Take Paul Keating for example:
- “He has more hide than a team of elephants.” (Keating on Howard)
- “You boxhead you wouldn’t know. You are flat out counting past ten.” (Keating on Tuckey)
- “(His performance) is like being flogged with a warm lettuce.” (Keating on Hewson)
- “The Opposition crowd could not raffle a chook in a pub” (Keating on everyone)
- On each other ..
Whitlam: “That was a good speech. You should go back comrade, and get yourself an honours degree.”
Keating: “What for ? Then I’d be like you.”
But if all else fails we can just remember the late great Douglas Adams …
“It gives me a headache just to try to think down to your level.” (Marvin the Paranoid Android)
Let’s face it, the Labor Party isn’t going to get re-elected unless we see some real new ideas playing on their traditional strengths.
May
31
A small percent of a big number
by Joshua Gans | Filed Under Regulation | Comments Off
I have taken a little time to get around to this, but a couple of weeks ago the Productivity Commission released a report into waste management. The blaze of publicity centered around their conclusion that only 1 percent of all plastic bags used in Australia find their way into streams and such, potentially choking wildlife to death. The PC reached the conclusion that perhaps a blanket ban on plastic bags would be over-kill. This is the kind of conclusion that economists normally latch onto — you know, policies should have a proper weighing of costs and benefits. See Harry Clarke for an example and The Age for a write-up.
Now I was curious about this one because all of the reports reported the 1 percent (a small number) and concluded that plastic bags were a small problem. But 1 percent isn’t a number at all, but a ratio. So what is the number?
Well buried deep in the PC report is the total number of bags consumed by Australians per day: 8 million. So that means that 80,000 bags a day are going into streams and such. That translates to 30 million per year. Now that seems to me like a big number. In 2005, this number was 34 percent less than 2002 because of the campaigns against plastic bags; that is 10 million less. (According to other sites, the total might actually be many times higher perhaps of the order of 60 million).
The issue with regard to the 1 percent, therefore, is that it doesn’t tell us whether plastic bags are a problem or not. The magnitude will tell us more about the cost. But it does tell us that policies designed to reduce overall plastic bag usage might be hitting at the wrong end of the problem. Instead, we likely need to spend money limiting the amount of plastic bags that enter into streams. That would directly hit upon the cost.
[Of course, it could all be because of a few offenders and not general practices. In this case, we need even better targetted policies. See this New Yorker article by Malcolm Gladwell for more].
May
30
Starting out elsewhere
by Joshua Gans | Filed Under Academia, Economics | Comments Off
New research on the career paths of academic economists tells us pursuing careers in Australia something very important: consider starting your career elsewhere. Stanford’s Paul Oyer has studied the career paths of economists conditioning on the status of their initial job placement. Now of course initial job is an indicator of quality but it also is driven by other factors; principally, the state of the academic labour market. When there is high demand for faculty, an individual will likely get a higher placed job as compared to situations were there is low demand. Come out in a boom year and you have a 40-60% greater chance of ending up in a Top 50 department later in your career or getting a Top 5 publication in your first decade.
There have been a few write-ups about this paper recently (see, for example, Joel Waldfogel in Slate; Greg Mankiw; and Mark Thoma). All have the advice work hard early or you’re stuffed. That is nice but you could also have advised people to change their surname to an earlier name in the alphabet because we do not really know why the market for academics appears to be operating based on random factors and not more efficiently sorting.
Now the argument being made of course is that after the fact there is efficient sorting and that initial placement actually affects academic productivity. In that case there is a cautionary tale for those starting out. As I sit here well outside the top 50 (at 106 according to the measure Oyer used) I figure I might be able to offer a different perspective.
If I were to guess, the main distinguishing factor is the research environment. As you move from the Top 50, the time available for research diminishes greatly. Teaching loads are higher and in smaller departments so are administrative loads. In my initial job at the University of New South Wales (ranked 135) the teaching loads at the time (I was there from 1994 to 1996) were extreme. In the semester before I left I was teaching between 12 and 18 hours a week (mostly lectures) across 5 different subjects. I taught in 8 different courses ranging across macroeconomics, microeconomics from 1st year undergraduate to PhD. Not surprisingly, it was rather difficult to get things done. Hopefully, things have improved since then for junior faculty. (At the time, senior faculty had lower teaching loads).
The reasons why I moved to Melbourne should be obvious but it is a very different environment here. In both the Business School (where I am) and the Economics Department teaching loads for research active faculty are very low; especially compared with simlarly ranked institutions. And it wasn’t until I came here that I was able to hit top tier journals. The experience of my colleague Catherine de Fontenay who made a similar move also attests to this.
So my advice to those starting out is to value your time appropriately and make sure you have guarantees regarding your teaching load. My strong guess is that is the critical variable driving Oyer’s findings.
[PS. Oyer relies on the ranking provided by econphd.net for his study. It is based on the quality of publications of a department's top 15 authors. Econphd.net is a great resource for those choosing PhD programs and was established by University of Melbourne economics PhD student Christian Roessler. Someone to watch out for on the market soon.]
[PPS. You might wonder why I went to UNSW first. Well, I had a Fulbright Scholarship that required me to come back to Australia. I did and have been very happy overall with that (especially for my personal life!). Of course, Oyer's study suggests that you might think twice about taking one of these scholarships.]
[PPPS. All of this only enhances the rationale for free immigration amongst academics].
May
29
Optimal supermarket queuing
by Joshua Gans | Filed Under Game Theory | 4 Comments
Economists think alot about queues whenever they are standing in them. For example, Steve Levitt became preoccupied with Disneyland queues earlier this month.
Today, my co-author, Andrew Leigh recounts his supermarket experience. He ponders the difficult issue of what line to stand in and concludes that it may be best to make your assessment, go to the nearest queue and stick to it. Queue picking is a hard issue. It is a little like an auction. You are observing check-out’s bids for your patronage. The shorter queue reflects supply and demand. It may be short because checking out is efficient or it may be short because others have worked out that it is hopelessly inefficient. What is the truth also depends upon the ratio of queues to queuers.
This means that a static assessment of your options is not enough to make a long term judgment. You need to observe the dynamics of the situation before you can judge and you may want to update and change queues. The problem is that involves a switching cost as you have made a sunk investment in a particular queue and would be forced to go back to the start by re-optimising.
What you need to make this all much better is one of the following:
- Real markets: you should be able to pay to get a better place in the queue. See this article in Slate.
- Reverse queuing: Steven Landsburg in Slate suggested that we might change the convention and have arrivals to queues go to the front rather than the back. His issue is that everytime someone joins a queue that imposes costs on those who come later. That won’t happen if people can join the front of the queue. In the context of supermarkets it would be those at the back of the queue jumping around to see if they should join a longer queue; assessing the speed of the checkout and so forth.
- The one queue hypothesis: queuing theory tells us that having many check out queues is hopelessly sub-optimal. Better to have a single queue leading to multiple check outs as they become available. Average waiting times are much much less.
- Crying children: the best way to improve your own waiting time is to have a crying child. If your child is not crying, do something to make them cry. I can tell you that it works a treat. No one wants to stand in a long queue with a crying child and you can move to the front so minimise that pain.
May
29
In Hansard …
by Joshua Gans | Filed Under Competition Policy | Comments Off
Earlier this month I testified before the Australian Parliament on the impact of the Reserve Bank’s credit card reforms. For those of you who can’t get enough of this, the transcript is now in Hansard. Click here to download the day. I start at about page 20 and blather on for about 8 pages.
May
29
Updated Web Page
by Joshua Gans | Filed Under Other | Comments Off
It has been about 6 years since I have done this but I have redesigned by academic home page. Click here to see the result. The idea is to make it a more ‘living document’ than I had previously with more about ‘what’s new’ than ‘what’s old.’
May
28
Game Theorist: Toilet Training and Incentives: Child No.2 (Part I)
by Joshua Gans | Filed Under Economics, Parenting | Comments Off
There is a new post today on GameTheorist (my original blog I started in 2003; I mentioned it in an earlier post).
I decided to revitalise that blog in order collect together some of my longer posts on parenting issues. I have visions of a book — did someone say Parentonomics? So GameTheorist contains some cross posts from this blog and I intend to continue to do that. I have more ideas to write about but they take a little longer and so the posts will be at irregular intervals.
May
27
Opening Up Immigration
by Joshua Gans | Filed Under Academia, Economics | Comments Off
Lots of talk today on the web about an open letter proposal from Matthew Yglesias. He writes:
I’ll believe that this is all about altruism when I see an open letter from economists demanding that we scrap the complicated H1B visa system and instead allow unrestricted immigration of foreign college professors.
Brad de Long and Greg Mankiw are happy to sign even if it might depress their own wages.
Here in Australia we have similar restrictions that create hurdles for hiring academics. Even getting a visa for a visit can be a struggle. So I will, of course, lend my support for a similar initiative here.
But let’s be clear about one thing: I cannot claim that this will be purely altruistic. If all countries adopt free migration for academics, there is every chance that my wages could rise rather than fall. Remember competition has two edges. I may face more competition from overseas academics for jobs in Australia but at the same time I will have more options competing for me. What happens to my pay as a result of this is unknown.
May
27
Page 3 News
by Joshua Gans | Filed Under Economics | Comments Off
Our paper on “The Millennium Bub” appears to have made the news today (page 3 of The Age no less, “Y2K proved a turn-on”). Obviously, the article focused on the conceptions result but did quote liberally and accurately from the paper.
May
27
The Low Productivity Genius Factory
by Joshua Gans | Filed Under Book Reviews | Comments Off
When I picked up The Genius Factory
May
25
The Y2K Bub
by Joshua Gans | Filed Under Behavioural Econ, Economics | 7 Comments
Much was foretold about the problems that might have befallen us on the day of the Millennium (1st January, 2000). Little happened, of course, that was detected by the human eye. But it appears the statistics have uncovered a little something; perhaps a hint of optimism. Perhaps a way to remember the ages of your children. Perhaps a good time. Who can tell?
Andrew Leigh and I have made a habit this year of looking at Australian data on births and deaths by day. There is lots of interesting stuff and I am sure we will tell more about them in due course. Among the less interesting but quite fascinating facts uncovered was that — all other explanations of how many births and deaths there are on a day aside — the 1st January, 2000 was a bigger than usual day for both births and deaths. The deaths bump wasn’t statistically significant but the births one was. We estimated that births jumped by between 5 and 12 percent in the first week or so of the millennium as compared with the previous week.
Why might this have been so? Novelty value most likely. A fresh start for parents with some discretion over birth timing (through planned ceasrians or inducements). Or perhaps an easy way to remember ages. My son is turning 6 this year and all I have to remember is that it is 2006 to work that out.
Of course, curiousity can get the better of us. If we look 9 months ahead to September 2000, there was another bump in births; perhaps 3 to 4 percent. This was statistically significant too; enough to suggest that the 1st January was a bigger party night for some that year than it usually is.
Anyhow, you can read the paper in all its technical glory here. It is an empirical one; hence, the catchy (corny?) title, “The Millennium Bub.” (See my earlier post about catchy titles).
May
25
Apparently, in a recent speech, Hillary Clinton said that “young people today think work is a four-letter word.” I am not sure but was she implying that young people in generations past used to think work was something other than a four-letter word? If so, all those Spelling Bees in the US are paying off.
May
25
Catchy titles
by Joshua Gans | Filed Under Academia, Economics | Comments Off
Nothing pleases me more than having a clever title for an academic paper. Some that myself, co-authors or others have suggested for my papers include “First Author Conditions,” “Licensing the Gale of Creative Destruction,” “Inside the Black Box: A Look at the Container,” and, of course, “Knowledge of Growth and the Growth of Knowledge.”
[From Marginal Revolution] Hugo Mialon (Emory) has studied citation rates on academic papers in economics and has found, among other things, that catchy titles tend to increase citation rates for empirical papers but lower them for theoretical ones. Suffice it to say, most of my papers are theoretical, so this is bad news for me. I had better stick to titles like “Regulating Private Infrastructure Investment: Optimal Pricing for Access to Essential Facilities.”
May
24
Picture in picture
by Joshua Gans | Filed Under Technology | 1 Comment
[Via Boing Boing] This is as cool as it gets. Click here to see an ‘infinite’ photomosaic.
May
24
Obscene exec pay is not a prize
by Joshua Gans | Filed Under Game Theory | 1 Comment
I normally like Tim Harford’s analysis and conclusions about the frustrations of everyday life. However, this article in Forbes comes up short. Harford looks at the high level of executive pay and provokes us by suggesting that the pay is not for the exec’s benefit but for the benefit of their underlings:
The ugly truth is that your boss is probably overpaid–and it’s for your benefit, not his. Why? It might be because he isn’t being paid for the work he does but, rather, to inspire you. In other words, we work our socks off in underpaying jobs in the hope that one day we’ll win the rat race and become overpaid fat cats ourselves. Economists call this “tournament theory.”
This an appealing theory for companies that have a policy of promotion from within. However, it does not apply to top level execs where many appointees are from outside companies.
Let’s dissect the tournament argument. A company wants to motivate employees to outperform one another. They offer promotions with ‘excessive’ rewards. The rewards are greater than the person’s immediate value to the company. However, seen as an incentive device they might make sense. So one could imagine that a company might commit to overpaying so as to save money motivating a mass of others; giving each a chance at a bigger prize.
But this all depends on the reward going to one of the contestants. If a CEO is an outside appointee that doesn’t happen. In this case, the company is commiting to reward employees outside their own company. But they do not get the benefit from that (the higher productivity is elsehwere) so it does not make sense. [Of course, CEOs may be colluding but that is another matter].
Now you might argue that if there is a chance that an insider gets the job, then high exec pay expands the range of competition and may encourage more competition internally. But it also expands the field. So there is a trade-off. Competition can motivate but too many competitors can be de-motivating. Moreover, the CEO tournament doesn’t run too often. So every time you actually appoint an outsider you are killing competition for awhile.
May
24
Paying people to watch ads
by Joshua Gans | Filed Under Advertising, Strategy | Comments Off
In an earlier post, I noted that the television-ad game is a funny one. In order to get viewers to watch ads they don’t like, broadcasters intersperse them with television programs they do like.
Today, CBS have announced a new way to get people to watch ads. They are going to provide clues within ads that give viewers the chance to win prizes. This isn’t such a new idea. Individual ads have often contained incentives to watch them. What is new is that it is being done at a broadcast level. Specifically, it is directly aimed at giving people an incentive not to skip ads using digital video recorders. [In this respect, it is similar to the Ayres-Nalebuff saving-lottery scheme].
Ultimately, the ideal would be to separate out the ad market from the television one and have people pay to watch television and to be paid to watch ads. Clearly, the latter is a market that is difficult to achieve as it is hard to monitor compliance. But, as a matter of principle, it is what one would want. Paid download television is a step in the right direction there giving people a paid opt-out option for ads.
May
24
A post I can’t ignore
by Joshua Gans | Filed Under Economics | Comments Off
Scott Adams on The Dilbert Blog today has a provocative post (to me at least) entitled “How to Think Like an Economist.” He says, very accurately:
The most important skill you learn in business and economics classes is how to compare things. The average person can be forgiven for lacking those skills. It’s not a natural capability. Like most things, it helps to be trained.
Economists do think alot about how to compare things although that is a task that is required only if certain questions are asked. .
His question today was “should the United States send $3 billion per year to Israel?” Adams then criticises previous comments on his post that named only the possible benefits of giving aid to Israel. He argued that to answer this question you need to compare those benefits to other possible uses for $3 billion.
This is right, but his criticism on his readers is unfair. His original question was “why do we give foreign aid to Israel?” To see why this is unfair, you need to know that economists make a distinction between normative questions (why should we do that) and positive questions (why do we do what we do). To answer normative questions requires being able to compare the activity in question to other alternatives. Sometimes that helps us understand a related positive question but not always.
For the Israel question, the distinction is important. Consider some of the good answers given by Adams’ readers:
- Aid was part of the U.S. promise at the Camp David peace accords to get agreements between Israel and Egypt. Egypt gets about the same amount of U.S. aid as Israel. (How long did the U.S. agree to continue funding? Forever?)
- In exchange for U.S. aid, Israel is required to buy stuff from the U.S. (mostly military), thus lining the pockets of the military industrial complex.
- U.S. politicians don’t want to lose Jewish votes.
- Many Christians in the U.S. believe that the nation-state of Israel must be restored and the Temple Mount rebuilt prior to the return of Christ and the following “Tribulation.” Thus, support for Israel as a nation-state is viewed as supporting God in history’s culmination.
Only the last of these questions is one that requires comparing alternatives as to whether this is a good way to spend money in order to understand why the funds are spent. The first three do not. They are answers to the positive question without the same normative elements.
Answer three is political for which proper analysis is whether this is the best way for politicians to win elections. So there is a private comparison for politicians there. The first and second answers are that the funds are not funds but a payment for services (I guess three is like that to). In this case, the question is whether the services were worth paying for or not at the time agreements were made.
In the end, Scott Adams needs to be clearer when he asks a question like this so as to distinguish the positive from the normative.
May
23
What could have been
by Joshua Gans | Filed Under Politics | Comments Off
Comedy wise that is; click here. George W. Bush would have been doing this on SNL.
May
23
Mobile
by Joshua Gans | Filed Under Technology | 2 Comments
This is just a test post from my new Blackberry toy. They say I’ll be addicted to it. But wasn’t I addicted to email already?
May
23
You don’t need no education
by Joshua Gans | Filed Under Academia | Comments Off
News today that apparently Einstein wasn’t that great at maths. He was very good at thinking up broad ideas but not so good on the details of proofs. Even so he was able to derive E = mc^2 although only a few months after his main paper on special relativity.
This follows on from the well known tale that Einstein didn’t speak properly until 8 or 9.
Just goes to show what you can get away with.
May
22
Neutral Networkity
by Joshua Gans | Filed Under Regulation, Technology | 4 Comments
An interesting debate has emerged in the United States regarding the concept of “network neutrality.” This is the idea that Internet networks should not discriminate based on content. The debate involves lots of rhetoric and a lack of clarity on the economics of the situation. A regular reader provoked me into thinking about this issue and there is nothing like to demand to generate supply. And so supply I shall.
May
21
The penny drops
by Joshua Gans | Filed Under Advertising, Strategy | 1 Comment
Sometimes we can be a little slow. A few weeks back I wrote about Amazon.com’s wrinkly pricing. This is where it gives users of its A9 search engine a 1.57% discount on its products when they conduct a certain number of searches.
Amazon.com say that the 1.57 is approximately pi/2; that is, pi as in 3.14 etc. Apart from noting that that was a non-round number I thought that they were just being mathematically cute in the way Google often is.
Well, the penny has finally dropped for me at least. The discount is a reward for searches that itself make Amazon more money through advertising (perhaps of its own products). So the discount or rebate is a share of the value or ‘pie’ created from this type of activity. It would ‘split the pie’ as they say in negotiations. Hence, pi/2. It was not mathematically cute but economically cute. La di da.
May
20
Piracy cost claims versus World Wealth
by Joshua Gans | Filed Under IP | Comments Off
In a provocative post, Donny’s Blog calculates that if the RIAA got its way and was able to extract $150,000 per infringement, in one month it would accumulate more money than the annual GDP of France. In the end, some $11,441 billion. This seems a tad more than the $300 million per year the RIAA estimates it is losing because of downloads. To recover that, only 2000 prosecutions would need to be successful.
I enjoy these types of calculations, but it would be remiss of me not to point out the obvious: the fines for those prosecuted are much more than the cost imposed by them on the music industry. This is consistent with the economics of crime and penalties that tells us that to deter an activity when you can’t catch everyone you need to set penalties high enough that people who gamble on not getting caught won’t do it.
But this calculation does enable us to assess what the probability of being caught might be. Let’s suppose that the RIAA targets 2,000 successful prosecutions per year. Using the numbers that got us the $11 trillion cost per month, there are possibly 1 billion downloaded songs per year. Thus, your probability of being caught is 2 a million. To back out the deterring penalty we take this and divide it through the cost of downloading a song legally (that is, $1). That gives us $500,000. [I guess if we could adjust for US versus other downloads it may be less].
So according to this, the RIAA’s penalties are too low and not too high as the blog was suggesting. Perhaps that is why downloading still occurs.
May
20
And the code is … [Spoiler alert]
by Joshua Gans | Filed Under Movie Reviews | 1 Comment
Last post I described the mystery in The Da Vinci Code movie that wasn’t in the book. Namely, how did they get all that great presentation material in lectures. It really was wonderful and I couldn’t imagine they could have done it with PowerPoint. I said that I had solved the mystery. Don’t read on if you don’t want this revealed.
OK, the first clue can be seen in the audience of Robert Langdon’s lecture. At least three people are listening to iPods. Then when he is signing books, one of those people is still listening to an iPod in the line while eating something round and red.
Then, in the background of the French Mansion where we get The Last Supper lecture from Ian MACCallum there is a computer in the background that looks much like an iMac but it is blurry.
Finally, Langdon solves the mystery when he searches for a 5 letter word to enter into the codex. And the word is “A P P L E.” Ahhh. I knew it! No wonder the evangelists are up in arms!
[Of course, this doesn't explain why everyone in the movie uses Sony phones].
May
20
I cracked the Code
by Joshua Gans | Filed Under Movie Reviews | 1 Comment
Last night, we went to see The Da Vinci Code. It was pretty much exactly like the book. That would normally lead to the conclusion “if you liked the book, you’d like the movie.” I’d say it probably is more accurate to say that “if you liked the book, you won’t hate the movie.” But the problem really is that the best bit about the book was the following tactic: towards the end of relatively short chapters, Professor Langdon would say something like “unless it really isn’t a cup?” or “I’ve got it now.” Then you could have to read on to find out what he meant. This you would do about 1000 times until you were at the end of the book. Then you would remark: “boy, that was a real page turner!” It was as hard to leave a half read book of this kind as it would be to leave a half eaten box of Krispy Kreame donuts.
The problem is that if you have read the book, this experience of continual revelation isn’t there. The best that you can hope for is that you forgot what clues were revealed and you are surprised again. For me at least that didn’t happen often. I wonder what the movie experience would be like if you hadn’t ready the book? We will have to force those 3 people to go so we can find out.
What you do get in the movie (and it is not really worth the ticket price for just that) is better graphics. Now I don’t mean this in terms of CGI but instead in lecture presentations. Robert Langdon presents a book tour lecture with some superb use of what might have been PowerPoint but seemed to good so you can’t know. Then the evil history buff uses some other lecture presentation material to move around people in the Last Supper and show us other things. Now you just don’t get that in the book. But the real mystery to me was “how did they do that?” Where can I get my hands on that presentation software? It may really beef up my lectures.
As I watched the movie the clues were revealed. But I’ll tell you about that in my next post (don’t read it if you don’t want the mystery revealed).