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
Sep
30
How many Nobel prize winners do you need?
by Joshua Gans | Filed Under Academia, Advertising, Economics | 2 Comments
The Economist has an advertisement for Chicago’s Graduate School of Business. It offers the following ‘quick fact’:
Minimum number of Nobel Prizes a business school’s faculty should win before you consider enrolling in its Executive MBA program.
Answer: 6
Now the ad doesn’t claim that Chicago GSB actually has this many Nobel Laureates on its faculty. Just as well. When I looked (click here) I could only find two: Gary Becker and Robert Fogel. Now there are a ton more outside of the GSB (Lucas, Friedman, Heckman, Schultz, etc.). But actually you will get to 6 by thinking about the past GSB Faculty (at least they might have been) including George Stigler, Merton Miller, Ronald Coase and Myron Scholes; two of whom have passed away.
So, by any calculation, what this ad is suggesting is that no one should ever consider enrolling in an Exective MBA program. After all, the ad continues: “As you weigh the merits of Executive MBA programs, use the right benchmarks.” Talk about your market killing promotion.
Sep
30
Petrol discounts redux
by Joshua Gans | Filed Under Competition Policy | 3 Comments
It has been over three years since Shell introduced a 4 cent per litre discount on petrol if you produced a docket for $30 or more of grocery spending at Coles. Stephen King and I raised concerns about these moves (the Shell-Coles deal and the Caltex-Safeway deal) that they would not lead to demonstrable consumer benefits and may cause independent petrol stations and grocery chains to be weakened competitively. (Here was our op ed and here was a policy oriented piece). Read more
Sep
29
Paying more for charitable goods
by Joshua Gans | Filed Under Game Theory | 2 Comments
A new paper by Dan Elfenbein and Brian McManus looks at charity auctions on eBay to see whether giving part of the auction proceeds to charity raises bid prices. Here is the abstract: Read more
Sep
29
In today’s AFR, John Quiggin gets it right on water (click here for the article). Basically, he argues that water should be priced at its true marginal cost thereby giving people an incentive to economise on it. To take care of potential redistributive issues, he proposes a ‘free allowance.’ So this means that you don’t have to pay for the water you really need. Clearly, this type of two part tariff is the way to go.
It reminds me of the situation in Victoria that, while it has got better, is still far from this. We had a multi-part tariff involving a fixed fee and a low usage fee (way below marginal cost). The fixed fee was based on land value so it was explicitly a redistributive device used to subside low usage fees. Politically, this gave rise to a situation where even if you didn’t use a milli-litre of water, you still had to pay. But worse, economically, it gave people an incentive to over-use water. We need to go to a Quiggin-type approach and save ourselves this trouble and also the trouble of quotas, monitoring and the rest of the mess.
Sep
28
While I was out …
by Joshua Gans | Filed Under Economics, Politics | Comments Off
Being on narrowband this past week has made it difficult to stay in touch with the news. Here are some highlights of what happened while I was out …
- Someone built Hogwarts out of matchsticks.
- A blogger may have saved someone from execution.
- There was a contest to photoshop some real life computer games.
- Lego Star Wars II: The Original Trilogy computer game became a big hit. I have been playing this and let me tell you, you will be hooked as soon as you realise Princess Leia can slap a stormtrooper to pieces.
- Telstra attempted to prove that the government does not need T3 for Telstra to be independent by not supporting the government’s nominee for the Telstra Board.
- The Telstra chief managed to got paid $1.5m for spending $54m on a strategic plan which looks bad but probably was part of some other innocuous recruiting agreement. But then again whenever people get paid this much it looks bad. Doesn’t that suggest something?
- John Howard managed to get himself on the front page of the newspapers doing something completely normal (holding hands with his wife) by provoking just one person to criticise that and thereby be clearly on the right side of an argument and to distract from real issues facing Australia. This is a controversy that is both definitely wrong and not even wrong at the same time.
- And I discovered that never again will I go on holiday where there isn’t broadband. It is impossible to keep up to date on the crap that I like keeping up to date on. Hotels will be able to charge me a fortune in the future for Internet access. However, a hat tip to Bloglines whose new mobile squeeze software made reading the text based blogs on my Blackberry very easy indeed.
Sep
27
The Jetstar Black Market
by Joshua Gans | Filed Under Game Theory, Parenting | 15 Comments
[Cross posted at GameTheorist] As I write this I am sitting on a Jetstar flight; the only airline to travel direct from our holiday destination to Melbourne. Suffice it to say, this is an incredibly awful flight. Even more so than the absolutely zero dollars in savings we got because we pretty much had no choice but to take it. Read more
Sep
26
GameTheorist: Holiday Posts
by Joshua Gans | Filed Under Parenting | Comments Off
This week on Game Theorist I wonder why airlines are so bad at feeding kids, who really pays when kids eat free and consider how to get kids to wash their hands when doctors apparently do not. They all seem mess and eating related. Must be some sort of obsession.
Sep
24
Kids eat ‘free’ so others eat ‘free of kids’
by Joshua Gans | Filed Under Economics, Parenting | 2 Comments
[Cross posted from GameTheorist] One of the attractions of where we are on holiday is that kids ‘stay free and eat free.’ Now, ‘stay free’ is really a slogan in name only. It means they won’t charge you for kids so long as you stuff them into your room. Suffice it to say, there is a considerable reason to not doing that and hence, you end up paying for larger accomodations and non-free stays.
Sep
24
Light non-travel reading
by Joshua Gans | Filed Under Book Reviews | 1 Comment
If I told you that I was reading a Bill Bryson book while on holidays, you would be excused for thinking it was a travel book. Well, unless you happened to be travelling back to Des Moines, Iowa, in the 1950s, there is no travel-related information in The Life and Times of the Thunderbolt Kid. In his latest book, Bryson recounts amusing stories from his childhood. And if you liked his other books, you will like this one. It is lightly amusing and also an insight to how people reacted to the dawn of the modern age.
Perhaps the highlight of the book are the chapter beginning press clippings from the time. Here is an economically related taste:
In Coeur ‘Alene, Idaho, after householders reported that a car was tearing around the neighbourhood in reverse, Assistant Police Chief Robert Schmdit investigated and found behind the wheel a teen-age girl who explained: ‘My folks let me have the car; and I rand up too much mileage. I was just unwinding some of it.’ [From Time magazine, 9 July, 1956]
Excellent stuff.
Sep
22
Luxury labels like Louis Vuitton and Christian Dior are suing eBay for $62 million over claims that eBay is auctioning off counterfeit goods. Google has already been successfully sued for offering links to sites with counterfeits.
The question is: what does a successful claim like this mean? No one is accusing eBay (or Google) of counterfeiting. In eBay’s case, auctioning off such goods is illegal and if they become aware of it, they terminate the user. The problem is that they might not be aware of it.
If a Court holds that eBay can be held liable for not policing these counterfeits, then what it is saying is that it is socially optimal for eBay to expend resources in ensuring all auctions are legitimate. This is not an easy thing to do. eBay specialises in allowing easy access for sellers (a good thing socially). Thus, if you had a second hand Louis Vuitton product or were a legitimate re-seller, eBay would encourage you. But how does it distinguish these from others? And what happens for all of the branded products that might be offered? Can we expect eBay to require some sort of registration? If so, this would dramatically push up the cost to all users.
What is the alternative? The alternative appears to be what happens now. Louis Vuitton policies the eBay sites and notifies eBay on infringements. It bears the costs. Moreover, it will choose to bear those costs only if it thinks it that activity is worthwhile. Thus, as a policy, only some brand owners will monitor — those who think it is worthwhile — while others do not.
In this light, the costs of monitoring appear to be lower if eBay isn’t obliged to do it for everyone. Let the luxury brands do their own policing on this. It shouldn’t be hard as eBay provides a handy method of searching.
Sep
21
Market power and profits in SMH
by Joshua Gans | Filed Under Economics | Comments Off
An article in the Sydney Morning Herald discusses the relationship between market power and profits. That is, should investors look at market share and dominance when choosing companies to invest in. They asked me and here is what I said:
Examples abound of companies that came to dominate a market or were granted a government licence to dominate a market, only to fail to convert that power into great returns for investors.
Joshua Gans, professor of management at the University of Melbourne, says businesses with a large market share, especially where conferred by Government, can become lazy.
“The trouble is that having market power can make companies a bit softer,” he says.
In other words, I said the usual. When it comes down to it, if there is a return to monopolisation it is upfront. That is, if you bet on a company before it gets market power and then it gets it, you probably do well. But wait until it has got it and all those benefits are already capitalised in the share price. Thus, it doesn’t help you at all to look at current market power indicia.
Sep
21
Back in the narrowband
by Joshua Gans | Filed Under Technology | 1 Comment
Regular readers would have noticed that I have been quiet for a couple of days. Well it turns out that preparing for and travelling to a holiday location do not mix with blogging. If my mobile phone could handle this better that would be one thing but it doesn’t. What is more, I get here and sure the view is a nice tropical paradise but I am relying on a mobile card on my laptop that is not broadband. (Usually it is but not out here where for some reason Optus hasn’t expanded its 3G network). So I am blogging this at a maximum download speed of 30-40kbps.
Suffice it to say, it is character building. I quickly lament all those nice graphics on websites and especially anything that links for some ‘secured’ source of input. Put simply, I just can keep as up to date as I would like. Sure I can do a targetted search but a leisurely reading of other blogs and the news is pretty much out of the question. And downloading something large, like a document, that just isn’t happening.
What this means is that my blogging may drop off a little. Also, because I am on holiday, they are likely to move from economics to parenting, so there will be relatively more activity on GameTheorist this week.
Oh, and before anyone writes a comment — not that I am going to look at them given my narrowband unfriendly blog site — that suggest that because I am on holiday, what does it matter. Well, let me say now. You just don’t understand.
Sep
18
Your child’s future in the Courier Mail
by Joshua Gans | Filed Under Economics, Movie Reviews | Comments Off
The Courier Mail today contains an extension of my earlier blog entry on Al Gore’s An Inconvenient Truth (click here for today’s article).
Sep
17
Game Theorist: Weekend Post
by Joshua Gans | Filed Under Parenting | Comments Off
This weekend on Game Theorist, I whine about the level of primary school homework and blame the parents (other parents that is).
Sep
16
The Greenhouse Levy
by Joshua Gans | Filed Under Economics | 7 Comments
Earlier this week, I proposed a simple way forward on the issue of Australia complying with its international environmental obligations (should it decide to have any that is). The idea was for Australia to simply embrace carbon neutrality and either plant trees or purchase offsets. This would all be funded by a Greenhouse Levy which, like the Medicare Levy, would be a simple fraction of a person’s income. I estimated that about 0.6% (or $2 billion in total per annum) would do the trick.
The problem is that this was based on how a household might offset its carbon. If you visit a site like www.carbonneutral.com.au, you can calculate your household’s carbon emissions and the cost of offsets. I did this and our household produced 22.31 tonnes of CO2 equivalents per annum which would take 96 trees at a total cost of about $300 to offset. Most of this was due to air travel (mostly mine) and indeed by moving from a car to public transport we would only save a few trees per year. If all households paid this, then this would come to about $2 billion, as I had expected.
But this is just a fraction of total greenhouse emissions. Australia puts in some 600 million tonnes of the stuff into the atmosphere each year. That would take more like $10 billion to offset with a levy of over 3 percent. Getting neutrality from that perspective is not going to be as politically saleable as I had hoped.
Of course, to comply with Kyoto, we only have to reduce emissions to 1990 levels; 3 percent less than what they are now. That requires a reduction of 18 million tonnes per annum at a cost of $300 million. Now that gets us in the territory of a levy more like 0.1 percent. Given these numbers it seems embarassingly low an amount and I would love it if someone could confirm this. Indeed, instead of a levy, we could simply plough the baby bonus money into offsets and we would be done.
All this would put to pay the whole ‘we will destroy Australian industry’ nonsense that even a larger levy could deal with. Certainly worth talking about, I think.
Sep
16
Avoiding Ad Avoiders
by Joshua Gans | Filed Under Advertising | Comments Off
A cable television company in the UK intends to screen a single image for the entire 30 second slot for an ad (here is the report):
The ad for Showtime’s new drama “Brotherhood” will show a single image on the screen for the entire 30-second slot, and therefore retain its “sales message” when viewed even at the 12-times speeds enabled by digital video recorders, or DVRs.
Well, that might work for DVRs like Foxtel IQ that works like a VCR and simply allows you to fast forward through ads. However, it wont work for DVRs that allow a 30 second or more skip (like TiVo or EyeTV). Back to the drawing board, folks.
Sep
16
M. Night’s Different Movie
by Joshua Gans | Filed Under Movie Reviews | Comments Off
[Movie Review] I know I am going out on a limb here, but I enjoyed M Night Shayamalan’s new movie, The Lady in the Water. It is a little hard to say why. One thing I can say is that it was not because it had some terrific plot leading up to a completely unexpected twist; you know, like all of his other movies. If I had to put a word on it, it would be ‘charming.’
This movie is what it is, a charming story about a group of people whose lives touch the mythical. It is funny, quirky, mildly scary in places, and ultimately says that a person might find their role in the world in unexpected (to them at least) of ways. It is light-hearted, which appears to have stirred to critics’ ire. But Night also takes them out too by embedding a critical right in the movie. So if you are looking for something not too challenging or confronting, then I think you will enjoy this movie too.
Sep
16
Government pays $64,000 per baby
by Joshua Gans | Filed Under Behavioural Econ | 5 Comments
News reports today suggest that the baby bonus has driven an increase in fertility. Now let’s suppose that is true (this is something I am sure Andrew Leigh and I will try to confirm when we get our hands on the official data) and let’s be generous and suggest that this led to an increase in 12,500 newborns per year. Then taking the approximately $800m in payouts for the baby bonus last year, this comes to a payment of $64,000 per baby. Do I have to say what the $64,000 question is? Read more
Sep
15
The iTunes Games Index
by Joshua Gans | Filed Under Economics, Strategy | 6 Comments
As regular readers of this blog are aware, I have been tracking an iTunes (Song) Index (click here for past entries). The general story there is that (apart from Canada), the iTunes Index suggests that currencies are over-valued relative to the US dollar. This is in contrast to the Economist’s Big Mac Index which has a more mixed story.
One issue in this result was the possibility that with respect to songs, Apple (or US copyright holders) may have underpriced songs in the US (and Canada) as these were the first to be introduced. This week, Apple announced that it would be selling iPod games worldwide via its iTunes Music Stores. Exactly the same game offerings would be available everywhere. This meant that the prices were (a) set at the same time; and (b) were for precisely the same products. So I decided to generate a new index — The iTunes Games Index. Here it is:
There are several interesting things to notice about this. First, the Canadian game price exceeds the (parity) price for the US; so adjusting for current exchange rates, Canadians pay more for games than people in the US. Second, now every single currency appears to be overvalued relative to the US dollar. The next chart compares the over (+) or under (-) valuation for the iTunes Songs, iTunes Games and Big Mac Indexes.
In Europe, the correlations between the songs and games results are very tight. In Australia, games appear at a relatively lower price compared to songs and in Japan this effect is marked. In general, international game prices appear to be relatively less expensive than songs. This suggests that while there was some correction in the US game price on the part of Apple, there is a distinct tendency to charge more internationally than in the US. Why that should be the case is beyond me.
Sep
14
Spark in BRW
by Joshua Gans | Filed Under Innovation, Strategy | Comments Off
This week’s edition of Business Review Weekly has its annual Young Rich List and what do you know, I am in it. Well, actually, in the magazine. To be on the list would have required an incredible drop in standards on the definition of ‘rich’ and would have been on the older side of their definition of ‘young’ (Kylie and I were born in the same week). No, I comment on the list and, in particular, on entrepreneurship. (Click here for my article)
My thesis is that those who have got on the list by being entrepreneurial (as opposed to inherited wealth, entertainment or sports) are unlikely to make it to the old rich list. The risks that got them where they are today will likely take them out tomorrow. Not to destitution just not into obscene wealth. I argue that this is nice and healthy for innovation in the economy because it reflects an environment for experimentation.
Finally, I cannot let it pass that on page 56 of BRW, there is a entire page considerable waste of paper with what is surely an unnecessary glossy photograph of a commentator. How many carbon offsets am I going to have to purchase for that one?
Sep
13
iTunes Album Art
by Joshua Gans | Filed Under Strategy | 2 Comments
The new iTunes 7 has a cool feature that will examine your music library (regardless of where you got it) and then, if you want, send the information to Apple and download the album art for stuff not purchased from the iTunes Music Store.
Just a question: why are they doing this? After all, the album art is copyright material and so they needed permission to do all of this. My thought is that the aggregated information of non-iTunes purchases is pretty darn valuable to music companies even if they can’t identify individuals.
Sep
13
[From Economist's View] There is a Peanuts comic that appears in most economics textbooks (including mine) with Charlie Brown watching the news with it saying things like: “Skies were sunny today but economists warn that this could cause an increase in the price of sunglasses.” Now we can add this: “Helmets help cyclists keep their head safe but economics warn that wearing them could cause motorists to drive more recklessly.” Read more
Sep
13
Conjugated patent
by Joshua Gans | Filed Under IP | Comments Off
Microsoft has filed for a patent for a piece for software that conjugates verbs. Here is the report. People have wondered whether it is really a patentable innovation to write a computer program that does what textbooks and I guess others can do. I think, as usual, the issue is not whether it should be protected as IP as much as whether the patent system is really the way to go (as opposed to copyright).
Sep
13
Douglas Adams on the eve of the web
by Joshua Gans | Filed Under Technology, Television | Comments Off
[From Boing Boing] Here is a video of Douglas Adams from 1990 on the possibilities of hypertext. It is incredibly interesting, as much for what it gets right as what it gets wrong. It is just under 50 minutes. (Click here).
Sep
13
Curtain unopened
by Joshua Gans | Filed Under Economics | 3 Comments
Apple proclaimed “It’s Showtime!” today and released movies on its iTunes Music Store. Thus, Australia can now add these to (lots of) music and television shows not available under the free trade agreement with the United States. It was so nice of us to harmonise our copyright laws for no apparent reason!
And what to tell teenagers who are thinking of illegally downloading? The truth of course: If you download, you destroy the copyright holder’s ability to create have and have nots based, not on affordability, but on arbitrary location in our seamless global interconnected community. I am sure that they will listen as always.