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
Dec
31
Can consumption really put businesses out of business?
by Joshua Gans | Filed Under Economics | Comments Off
Well, surely not. But that is what you might think after reading this story by David Streitfeld in the New York Times. What business is he driving away? Bricks and mortar bookstores. And how is he doing it? By reading. Read more
Dec
31
Classifying disagreements
by Joshua Gans | Filed Under Blogroll | Comments Off
Paul Graham has an interesting essay about the type of disagreements commentors make on blogs (and elsewhere). Here is his list:
- DH0: Name Calling (“The author is a self-important dilettante”)
- DH1: Ad Hominem (“Of course he would say that, he is a Senator”)
- DH2: Responding to Tone (“I can’t believe that the author dismisses intelligent design in such a cavalier manner”)
- DH3: Contradiction (“I can’t believe that the author dismisses intelligent design in such a cavalier manner. Intelligent design is a respected scientific theory.”)
- DH4: Counterargument
- DH5: Refutation
- DH6: Refuting the Central Point
Personally when writing on the blog I try to keep to DH3 or above but I’m sure someone will find examples where I have strayed.
Dec
30
Michael Nielsen dabbles in the economics of scientific collaboration. He starts with the basis: scientists have limited time or skills and so can benefit from trade based on comparative advantage. The market price should mediate this but in scientific collaboration there are no prices as might appear in physical goods markets. Read more
Dec
30
More incentive issues than you can throw a cat at
by Joshua Gans | Filed Under Economics | Comments Off
I’m a day late but this article in The Australian shows just how many distortions are being introduced as a result of changes to the baby bonus policy. Let me count them:
- Means testing: distortion for high income earners to bring births forward into 2008
- Confusion over means testing rules: distortion for marginal high income earners to bring births forward into 2008
- Move to fortnightly payments: potential incentive for cash strapped low income earners to bring births forward into 2008
- Means test based on post-birth income: distortion to keep household income below $75,000 in first six months or $150,000 in first year. Earn a little bit more and you lose $5,000
- No income reconciliation: mitigates 4 by telling people that they can earn more or less without penalty but does this mean there is a means test?
Dec
30
Joye Blogs
by Joshua Gans | Filed Under Blogroll, Economics | Comments Off
My AussieMac co-author, Christopher Joye is Business Spectator‘s newest blogger. He will be blogging on property issues. The first post is here; on various issue associated with interpreting house price trends.
Sadly, there is no RSS feed for the blog itself (something you get from the Fairfax and News press). Hmm, can you really call it a blog if there is no feed?
Dec
27
It is commonplace to read in the newspapers and elsewhere that spending more this Christmas is a good thing. The theory is an old one: if I spend $1, that dollar goes into the pockets of some business who pays their employees and suppliers who then spend part of that dollar continuing a virtuous cycle until it peters out. The initial spending creates a multiplier effect in terms of greater aggregate demand — something we are currently short of.
But I suspect that not all expenditures are created equal. If a business receives and unanticipated bump in sales this Christmas, it may well use it to pay off debt or retain earnings for next year, which they still anticipate to be a bad one. In that case, it is effectively saved and there is no multiplier effect. It is only when those increased sales translate into positive expectations of a better year next year that the virtuous cycle can start.
This means that your increased spending is a lottery on the fiscal stimulus front. In contrast, government expenditure bringing forward long-term projects on infrastructure and related areas is a better bet. These go straight into expenditures to workers and suppliers and so have the potential to create multiplier effects. My guess is that the government can target these things better than individual consumers.
I am not saying here that individual consumers should not spend. What I am saying is that if you want to spend more out of some concern for the economy you are better off lobbying for more government expenditure than trying to pick and choose and change business expectations all on your own.
Dec
27
Megan McArdle becomes concerned about the way the term ‘moral hazard’ is thrown about.
Bankers take risk in order to make money, and they control risk in order to avoid losses. But the losses they are most interested in are not to their shareholders. Rather, they are worried about the loss of their jobs. As long as the bank regulators fire any managers who put the bank in receivership, I can see no difference between an unregulated private system without deposit insurance, and a system with. That isn’t to say that there is enough regulation in either situation. But if there is a problem, it is that bankers have a socially less-than-optimal risk appetite, or that the punishment for driving a bank into insolvency is insufficient. The moral hazard from deposit insurance doesn’t much enter into it.
The moral hazard for depositors may be large. But I doubt it. Most depositors are not capable of determining whether a bank is faulty or sound, and they weren’t in 1830, either.
The reason that desposit insurance requires tighter regulation is that the government wants to minimize the cost to itself–not society, for whom the losses would be the same whether the government or the bank paid them. I think this is wise, for many reasons. But not because of moral hazard.
Dec
24
An altert reader notes that the WSJ reports on new (medical) research regarding the impact of gestation length on post-birth outcomes (something that I have remarked upon before):
A study in the American Journal of Obstetrics and Gynecology in October calculated that for each week a baby stayed in the womb between 32 and 39 weeks, there is a 23% decrease in problems such as respiratory distress, jaundice, seizures, temperature instability and brain hemorrhages.
You might want to look closely at that if you are thinking of bringing a baby forward into 2008 next week. The report goes on:
It’s unclear how many deliveries are performed early for nonmedical reasons. Preterm births (before 37 weeks) have risen 31% in the U.S. since 1981 — to one in every eight births. The most serious problems are seen in the tiniest babies. But nearly 75% of preterm babies are born between 34 and 36 weeks, and much of the increase has come in C-sections, which now account for a third of all U.S. births. An additional one-fifth of all births are via induced labor, up 125% since 1989. …
Why do doctors agree to deliver a baby early when there’s no medical reason? Some cite pressure from parents. “‘I’m tired of being pregnant. My fingers are swollen. My mother-in-law is coming’ — we hear that all the time,” says Laura E. Riley, medical director of labor and delivery at Massachusetts General Hospital. “But there are 25 other patients waiting, and saying ‘no’ can take 45 minutes, so sometimes we cave.”
There’s also a perception that delivering early by c-section is safer for the baby, even though it means major surgery for the mom. “The idea is that somehow, if you’re in complete control of the delivery, then only good things will happen. But that’s categorically wrong. The baby and the uterus know best,” says F. Sessions Cole, director of newborn medicine at St. Louis Children’s Hospital.
Dec
23
Trade in emissions permits is a good thing
by Joshua Gans | Filed Under Environment | 5 Comments
Tim Colebatch gives us an apparent scoop in The Age: we won’t reduce emissions by 5% by 2020.
Treasury modelling estimates that even with a cleaner, more effective model than the one now adopted, Australia’s emissions in 2020 would rise 5.8 per cent above 2000 levels. We would pump out more emissions in 2020 than we do now.
Sounds damning right? Wrong. While it is true that Treasury forecasts that we will emit more in total, the permits issued by the government will be 5% less than our total emissions estimated in 2000. The apparent discrepancy is because Treasury forecasts an international agreement by 2020 that will allow trade in permits. The WHOLE POINT of allowing such trade is to allow our industries to buy and sell those permits. Turns out that we are likely to buy them.
Think about what that means. If we buy permits, some other country has less of them. That means they emit less. So Australia’s policy has enabled a 5% reduction in emissions from our 2020 levels whether we actually emit less or not. And guess what? That is the WHOLE POINT — not to reduce our emissions per se but to reduce global emissions.
Colebatch argues that international permits are not real permits and so we shouldn’t trust them. But if we can’t do that there is no point to an international agreement. Moreover, if we can’t get an international agreement then we will have to reduce emissions on our own. So the issue there is that all this will be more costly to the Australian economy than Treasury is forecasting.
This type of distrust of markets is what has led to carbon offsetting not being part of agreements such as Kyoto. That is a big mistake as it removes incentives to find other ways of gettting greenhouses gases out of the atmosphere than putting less in. We need schemes that create lots of pathways to environmental management and not less.
Dec
20
Garnaut on the White Paper
by Joshua Gans | Filed Under Environment | 2 Comments
The news is reporting that Ross Garnaut has savaged the Government’s White Paper on Climate Change Policy. For instance, from ABC news:
Professor Garnaut says the Rudd government is aiming too low in its unconditional target of a 5 per cent emissions cut by 2020 and the policy announced this week will put the economy at risk.
Hmm, I read what Garnaut wrote in The Age differently:
The review recommended, and I support, the most widely and strongly condemned of the “soft targets”—the commitment unconditionally to reduce greenhouse gas emissions by 5 per cent from 2000 levels by 2020.
And as you read on, it is clear why:
It costs much more to reduce emissions in isolation than in the context of global action. Action in isolation does almost nothing in itself to solve the environmental problem. The purpose of acting at all in the absence of comprehensive global agreement is to keep alive the hopes of eventual effective global agreement. Australian emissions are currently significantly above 1990 levels. 2020 is not far away. Our population grows strongly, because we, for good reasons, have chosen to keep our doors open to people from many lands. Our new citizens need transport, a home with the Australian accompaniments, and access to income from employment, all of which generate greenhouse gas emissions. The white paper’s unconditional target is a challenging one in the absence of an international agreement. To go further would run the risk that Australia’s example of early action would be negative rather than positive in its influence on others.
That seems pretty clear to me and reflects what I said earlier this week.
Now Garnaut goes on to make several other points that I agree with. First, that given the low target, the level of compensation seems very excessive; unpredecendented in fact. Second, the way of dealing with trade-exposed industries murky and may be hard to unwind. Third, that the Government should not cap its conditional commitment levels and leave open room for a high commitment should international winds blow that way.
But we can’t ignore one thing that is a key difference between the Garnaut Review task and the White Paper’s task. The latter has to pass two Houses of Parliament while the former did not. With the Greens taking positions continually that never allow them to support moderate policies, the Government has to put forward a plan that the Coalition (or at least a big part of it) might support. That means industry handouts. Add to that Labor’s desire to soften the job impact and the politics almost necessitate the policy that we see being put forward. We can be grateful, however, that the timetable for its implementation is unchanged and let’s face it, going to international negotiations with a system in place rather than a constant internal fight is the best sort of leadership we can bring. Few other countries have achieved that much.
Dec
20
Economists tend to presume (and I am somewhat guilty of this) that broadband competition is broadband competition and the way broadband is delivered does not matter. Others object that one ADSL provider is a closer substitute for another ADSL provider than each is a substitute for a cable or wireless provider.
Well, according to this post at VoxEU we are all wrong:
- Inter-platform competition has a significant, positive effect on broadband penetration. For example, broadband penetration will tend to be 10% higher in a country where DSL and cable have equal market shares, compared to a country without a cable operator.
- Facilities-based intra-platform competition has an insignificant effect on broadband penetration.
- Service-based intra-platform competition has a significant, negative effect on broadband penetration. But the magnitude of this effect is less important than that of inter-platform competition.
That means that having two separate infrastructures for cable or DSL does not help but having two independent providers of DSL and cable really does.
A couple of weeks ago, CEDA’s Michael Porter advocated the government insisting (although that is now moot) that if Telstra won the NBN it should divest its cable network. Turns out that based on this new evidence that would have the best impact on competition. Indeed, according to the study, if Telstra were forced to sell its cable network to Optus that would result in the best competition-based broadband take-up.
Dec
19
So people ask me all the time how I think the NBN game will play out. Now that Telstra is officially out, it is not that hard to see. But let me give a precise timeline.
- Prior to Feb 2009: Telstra will announce a substantial upgrade to its cable network (getting us to 100Mbps+) completed prior to the end of 2009.
- March 2009: The NBN preferred tender is announced. That consortium will immediately claim that because Telstra has high speed services running past 2.5m homes (or will very soon), that their previous bid needs to be revised — with, of course, greater government contribution. The government puts forward proposed legislative and regulatory regimes for Telstra’s copper network.
- April 2009: Telstra launches first stage of legal action on proposed regulatory regime or constitutionality of proposed legislation.
- May 2009: Following negotiations, the NBN project is announced to commence immediately. The government vows to fight Telstra in the Courts and is confident of victory.
- June 2009: Telstra announced that its fixed line upgrades ($25 billion spent thusfar) mean that it now has fibre to the node passing 60 percent of the population. Announces that network will be switched on in 2010 so long as regulatory issues are sorted out.
- The preferred NBN bidder balks at construction at this point and announces delays until there is regulatory certainty.
- December 2009: The NBN project is yet to lay single line.
Of course, it might not play out that way but I thought I’d have fun with year-out futurology. One way of avoiding it is for the government to go with a big bang that by-passes Telstra completely and is happy to take it on as a competitive rival.
Dec
19
Baby boomlet
by Joshua Gans | Filed Under Economics | Comments Off
An article in the Australian Financial Review today looked at the likely baby boom in Australia in the last week of December this year. From January 1, the baby bonus becomes means tested and so those with higher incomes have a big incentive to bring those births forward. The article quoted the Royal Australian and NZ College of Obstetricians and Gynaecologists as confirming that their members will attempt and have already accommodated such requests.
In the article I also was quoted mentioning a boomlet that occurs every year around the 18-22 December. You can see it here in this graph for both Australia and the US. This people clearing out the backlog prior to Christmas. In Parentonomics, I describe how we were offered this deal with our second child who was due on 23 December. We happily accepted with the idea that the shorter the pregnancy the better.
Note also from that graph the boom in the last week of the year in the US. That is a tax induced boom that has been well documented.
Dec
18
Open Access
by Joshua Gans | Filed Under Economics | Comments Off
A friendly reader has pointed me to this post on the Federal Government’s blog about open access to public data. Thanks to the Cutler Review, it is clear that they are aware of these issues but the blog is a good place to put some specific examples in the comments. When it comes down to it, the best way to cut through this is likely through an Office of the Innovation Advocate as recommended by that review.
Dec
18
We are not alone on public data
by Joshua Gans | Filed Under Economics | Comments Off
I have lamented before the apparent lack of publicly released data in Australia for use in, say, Google Transit and similar services. Well, it turns out we are not alone. In Washington DC, talks have broken down between Google and the authorities. So the public data will not be so public. It seems, as usual, that the government wants some cut of the pie. By why negotiate? Why not simply say, if you want this data, it costs $x?
Dec
17
Well, it seems that a number of contenders have lined up to try and capture the iPhone ‘toilet finding’ application market. You might recall that I had this idea some months ago but was thwarted for easy entry because the government would not allow access to its toilet information.
First up, is Toilet Mate. This one locates you and lists the nearest facilities. To find them, you click and it launches the Maps application. It costs $0.99 and seems to work just fine. [Download]
Second, is Sit or Squat. This one is world wide and it looks like it relies on user generated information. It includes pictures and ratings and opening hours and what have you. It is free (funded by ads). Looks like it lists a large array of toilets including service stations but there were no ratings or pictures for any around me. Time will tell whether Web 2.0 kicks in there. But it did launch a map although not directions within the application and it is world-wide which could be a critical feature. [Download]
The latest is Show the Loo. This is an Australian-specific application and it shows your options on an application specific map with both walking and driving options. It has a convenient, “I’m busting” option to get you straight to the closest point. Best of all, it’s free. [Download]
The last one does the job as far as I am concerned but it is clear more innovation is on the way.
[Update: With a little more exploring I found that the Sit or Squat app was heavy on feature sorting including baby change facilities, handicap access, seat covers etc. That said, you have to be careful picking those as the information might not be there. My nearest toilet with seat covers was 653.111km away!]
Dec
17
Still struggling with headline numbers
by Joshua Gans | Filed Under Environment | 3 Comments
I posted the other day that I thought that the whole issue of headline numbers as a distraction from the fact that for the first time ever, Australia was going to commit to real reductions in carbon emissions. And it was going to do it with a systemic, market-based and adjustable policy rather than ad hoc placation with unknown effects. Apparently, being or appearing to be supportive of the Government drew fire from both sides of the climate change debate.
But the issue of headline numbers continues to drive the media attention. Tim Colebach in The Age questions the ‘per capita’ adjustments to the numbers as based on faulty data. Well, I have news for everyone, all projections have errors. This is yet another reason to consider them projections rather than something else. Moreover, even our ability to commit to five percent reductions from 2000 requires us to know exactly how much was emitted in 2000. Guess what? We don’t know that. We have an estimate based on coefficients based on energy consumption, agriculture and what not. No one measured all of our emissions and what is more, no one is going to measure them in 2020.
All we know is that we are going to have that measurement for the Top 1000 companies from 2010 onwards and we are going to issue permits that are required to target what we think is a 5 percent reduction. It is a guessing game just as how much money we print determines the inflation rate. What will really drive things is not our internal policies (which can’t easily be audited) but our international agreements (which will have audit arrangements as part of them). It is those agreements that will force our hand and will require adjustments to the number of permits we issue. And, in so many respects, that is exactly how it should be because this is a global problem. Whether Australia has a 5% or 50% reduction by 2020 will matter little for the total carbon actually in the atmosphere in 2020.
In this respect, I agree with those who are concerned more about what Australia’s conditional targets are rather than our unconditional targets. What sort of thing are we willing to agree upon at the international level? My belief is that we should go there with the intention of advocating a global target and then agreeing to an individual target based on handling a fair share (where “fair” is complex notion) of the load for getting there. And in that respect, our load is not simply our target (or emissions consumption) but, for example, how many dollars we will put into R&D for environmentally friendly technologies.
So with respect to the unconditional number, my belief is if that gets us the ETS quicker and implemented and operating by 2010 because it can get us through the political morass that accompanies this in these troubled economic times then so be it. Ask yourself: would you really want a 10% or 15% target with some uncertainty as to whether an alternative Government with a 0% target might get in and implement this by 2012 or would you rather have a certain deal with 5% implemented by 2010? The answer seems clear to me.
Dec
17
Telstra in the Courier Mail
by Joshua Gans | Filed Under Broadband | Comments Off
I have an opinion piece in the Courier Mail today on Telstra’s exclusion from the NBN process and what it means. I argue that Telstra are currently a part of any broadband policy and that is the problem. I identify shareholders — in particular, the Government as the largest shareholder — as the only people who have the power to do anything about it. Given the likely impact on their returns, they now have the incentive too.
Dec
16
Here is a prediction: by the time 2009 is out, we will see a revolution in the way Australian ISPs set download limits. Yes, they will still exist but some of the highest bandwidth content will become unmetered. We are already seeing this with several smaller ISPs (such as iinet) who have brought ABC’s iView and Apple’s iTunes Music Store under the limit. But the big one out there is Google and, in particular, YouTube. At some point, there will be an Australian cache of popular YouTube content. This will mean avoiding costly international backhaul fees and will allow Australia ISPs to provide that content unmetered.
We got a signal of that from the Google Public Policy Blog:
Google has offered to “colocate” caching servers within broadband providers’ own facilities; this reduces the provider’s bandwidth costs since the same video wouldn’t have to be transmitted multiple times. We’ve always said that broadband providers can engage in activities like colocation and caching, so long as they do so on a non-discriminatory basis.
All of Google’s colocation agreements with ISPs — which we’ve done through projects called OpenEdge and Google Global Cache — are non-exclusive, meaning any other entity could employ similar arrangements. Also, none of them require (or encourage) that Google traffic be treated with higher priority than other traffic. In contrast, if broadband providers were to leverage their unilateral control over consumers’ connections and offer colocation or caching services in an anti-competitive fashion, that would threaten the open Internet and the innovation it enables.
That last bit is interesting. Will Telstra really be happy to impose that kind of non-discrimination when it would compete with their own proprietary BigPond content services? I am guessing not. So here is a second prediction: Telstra will be the last to sign on.
Dec
16
Political science?
by Joshua Gans | Filed Under Environment | 12 Comments
Someone needs to help me out. I am have trouble following the climate change debate over the past couple of days.
To begin, let me accept a premise: scientific experts know what they are talking about and we should accept what they say in respect of their disciplines. So when I read this, quoting IPCC lead author Professor Andy Pitman …
“The science is uncertain, but it’s uncertain in the range of 25 to 50 per cent, not 5 per cent or 10 per cent or 15 per cent,” he said.
“It needs to be much deeper than that if we want to avoid dangerous, anthropogenic climate change.”
… I figure that is what the world needs to do to avert the problem; although I also figure that will be for the future and not immediately as IPCC says that climate change is already occurring and will take many decades to reverse.
But when the same person says this …
Professor Pitman said Australia should be leading by example.
“We actually do need international leadership,” he said.
“I think it is an opportunity for Australia to show that leadership, I think we’ve missed that opportunity in the short term.
“But that doesn’t stop the Prime Minister showing that leadership perhaps in Copenhagen later in the year.”
… that seems like a statement from political science or negotiation science. It is not a statement from climate change science. Professor Pitman isn’t an expert in that. In hundreds of publications not a single one related to that question.
But perhaps he is making that statement on the basis from someone who is. So here is my question: is it true that a small country by sacrificing much in the name of ‘setting an example’ can actually get the world to follow? I can’t think of a single instance in any arena of international negotiation let alone a systematic analysis of successful and unsuccessful leadership strategies in this field. But I am not an expert in political science, leadership or a field that might inform on this issue and so am happy to be guided towards that evidence.
Dec
15
Headline carbon numbers
by Joshua Gans | Filed Under Environment | 10 Comments
Australia will cut total carbon emissions by to 95 percent of 2000 levels by 2020. Given population growth, this amounts to a per capita reduction of 27 percent below 2000 levels (or 34 percent below 1990 levels). This is no small feat for a country that has never cut per capita emissions, has one of the highest rates of emissions in the world, and is going to do this all without using agriculture, a proper offset market or an international agreement.
Not surprisingly, many wanted to see a higher headline number. But this number outbids all European and North American commitments (to date and proposed by the Obama adminstration). To achieve it requires putting into place an apparatus for carbon trading and other policies the likes have never been seen in any economy. So 5 percent may not sound like much but it is a seachange. Certainly it is enough to stimulate investment in the industries that will need to bear the brunt of this in curtailing emissions.
Some argue that we need to commit to more to be seen to be doing the right thing and for global leadership. I don’t really know about that. I think we need to be promising things that we can credibly deliver. I don’t have the expertise to tell you whether 5, 10 or 15 percent by 2020 is reasonable or feasible but my guess is that 5 percent is credible and a promise the country can keep.
The interesting thing is what this does politically. The Greens will vote against it in the Senate so the government will need the Coalition. What are they going to do? Watering it down further will not look good but to reject it would invite a double dissolution on this issue. I am not sure that is the basis upon which to fight a successful election. My guess is that it will pass without too much difficulty.
Dec
15
Airport puzzler
by Joshua Gans | Filed Under Economics | 2 Comments
From Australian mathematician Terry Tao [HT: Greg Mankiw]:
Suppose you are trying to get from one end A of a terminal to the other end B. (For simplicity, assume the terminal is a one-dimensional line segment.) Some portions of the terminal have moving walkways (in both directions); other portions do not. Your walking speed is a constant v, but while on a walkway, it is boosted by the speed u of the walkway for a net speed of v+u. (Obviously, given a choice, one would only take those walkways that are going in the direction one wishes to travel in.) Your objective is to get from A to B in the shortest time possible.
1. Suppose you need to pause for some period of time, say to tie your shoe. Is it more efficient to do so while on a walkway, or off the walkway? Assume the period of time required is the same in both cases.
2. Suppose you have a limited amount of energy available to run and increase your speed to a higher quantity v’ (or v’+u, if you are on a walkway). Is it more efficient to run while on a walkway, or off the walkway? Assume that the energy expenditure is the same in both cases.
I told this one to the kids this morning where A was security and B was the plane. My 7 year old son, for 1, without hesitation answered “tie your shoe on the plane.” I guess that is the correct answer. But don’t feel bad if you are a bit slow, he has extensive experience with the untied shoe lace problem.
Dec
12
Problems with high birth weight
by Joshua Gans | Filed Under Economics | 3 Comments
A few months ago, my co-author Andrew Leigh got himself into a blogging argument when he noted the higher birth weights associated with the introduction of the baby bonus and termed it ‘over-cooking.’ The controversy was whether high birth weight was over cooking as such as opposed to enough cooking.
New research today suggests that high birth weight can involve complications just as low birth weight can. This is in a new paper by Resul Cesur and Inas Rashad put out by the NBER. You can download the paper here but the abstract summarises the results:
While the effects of low birth weight have long been explored, those of high birth weight have been essentially ignored. Economists have analyzed the negative effects that low birth weight might have on subsequent school outcomes, while taking into account unobserved characteristics that may be common to families with low birth weight babies and negative outcomes in terms of school test scores when children, in addition to labor market income when adults. Today, however, with increasing obesity rates in the United States, high birth weight has become a potential concern, and has been associated in the medical literature with an increased likelihood of becoming an overweight child, adolescent, and subsequently an obese adult.
Overweight and obesity, in turn, are associated with a host of negative effects, including lower test scores in school and lower labor market prospects when adults. If studies only focus on low birth weight, they may underestimate the effects of ensuring that mothers receive adequate support during pregnancy. In this study we find that cognitive outcomes are adversely affected not only by low birth weight (<2500 grams) but also by high birth weight (>4500 grams). Our results have policy implications in terms of provision of support for pregnant women.
Dec
11
iTunes Position Auction
by Joshua Gans | Filed Under Economics | 3 Comments
In an open letter to Steve Jobs, software developer, Craig Hockenberry, complains about the nature of the iTunes App Store. Hockenberry’s firm is responsible for two very successful apps — Frenzic and Twitterrific. His complaint is that the store is dominated by 99 cent apps — which he calls “ringtone apps.” These draw consumer attention and so dominate the Best Seller rankings which themselves drive more sales. His issue was that this was making it commercially non-viable to develop more serious applications that would have to be priced much higher.
The App Store is a great open platform. The reason it has 10,000 apps after just a few months is because it is easy for both developers and users to use. The problem is that the market is immature. People are still experimenting with marketing, value and understanding what they are willing to pay. There is extreme competition for attention.
This is not new to Internet-distribution. Indeed, perhaps Apple should take a leaf out of those who have done it on such a large scale — namely, Google. Google have an open platform for advertising that, if you think about it, is very similar to the App Store. Like the App store, you set a price. Also, like the App Store, quantity has a big role in position. For Google sponsored links, the more users click on the ads the higher is its position.
But position can also be guided by price. Let’s face it, an App sold for $10 selling 100 units should have the same value to Apple as one selling for $1 but selling 1000 units. However, their current ranking draws attention to the latter — at least for anything transparent (who knows what determines the ‘Featured’ items). The App store needs a weighted sales rank based on revenue as opposed to units. Alternatively, it could offer developers an op out of the 30% sharing with Apple in favour of a bid for placement, just like Google. That would allow developers control over the up and downside sharing.
Dec
10
ATM fees and other stuff
by Joshua Gans | Filed Under Competition Policy | 4 Comments
From March next year you will actually know how much it will cost you to withdraw money from an ATM. The RBA is requiring charges made at foreign ATMs (that is, not of your own bank) to be posted before you decide whether to withdraw your money. This is a great move and will likely boost the availability of ATMs. Such direct customer charging is optimal in these circumstances rather than charges being paid between banks and hidden from consumers. It is something I have called for, for years.
In related news, the ACCC has permitted Commonwealth’s take-over of BankWest. They apparently bought the line that the financial crisis would impede the ability of BankWest to remain an aggressive competitor. Really? How long are they expecting this crisis to last?