Friday, May 28, 2010

Economics Tattoos

I saw a group of pictures of nerdy tattoos yesterday, but I can't find the link. There were pictures of maybe 50 tattooed people with things like DNA, Darwin's drawings, physics formulas, and chemical bonds as well as a few famous lines from great books. There were no tattoos related to economics. Then I did a google search on economics tattoos no luck.

A search of Supply and Demand tattoo shows that Peter Leeson author of The Invisible Hook: The Hidden Economics of Pirates has the curves tattooed on his bicep (From Economists Do it With Models)

I'm not really into tattoos but if I had to get an economics tattoo, I think I would go with a set of indifference curves with a budget constraint.

Lucky for my family my indifference curves on the two axis of tattoos and nontattoo goods intersect at no economics tattoos.

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Thursday, May 27, 2010

Monopoly = 1 firm and Confusopoly = ?

Over at Economists Do it With Models (ECDIWM) a recent post attempts to explain why airline prices move around so much and why there are so many little fees (checked baggage, sodas, pillows ect.).

I need to buy airline tickets this week. We'll be traveling with my 6 month old daughter so we'll be checking luggage. I don't have time to check out each companies' luggage policy.

I agree with ECDIWM that part of the little fees is to separate types of customers and get increased profits. If I don't check bags and don't drink soda the ticket may even be cheaper for me. But I'm wondering at what point it becomes too hard to compare airlines if they have prices for several different parts of the trip.

This makes me think of a term Scott Adams the writer of the comic strip Dilbert coined a few years ago.

Confusopoly --"a group of companies with similar products who intentionally confuse customers instead of competing on price"

Luckily the Internet is on our side. Will it be long before travel search sites like kayak allow you to compute costs based on the number of bags you would check and sodas you would drink.

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Wednesday, May 26, 2010

Convincing the Most Important People Aid Works

Over at Aidwatch William Easterly & Laura Freschi have a great post on a puzzle of economic development. The world's poor (those living on $1-$2 a day) might actually have enough money to pay for things that would aid their economic success. In short research shows the poor spend 10% of their incomes on what we might think of as luxury goods alcohol, tobacco, soft drinks, and celebrations (e.g. weddings, funerals, holidays).

I have two thoughts:

1.) Easterly and Freschi are right people rich and poor make questionable decisions I like their line about a white American middle class dad "driving while talking on his cell-phone after having a few beers, risking the lives of his children in the car." So to get people to spend more money on school or not drink and pay attention on the road you have to convince them it’s the right thing to do.

2.) Relating to point #1 it is really hard to convince those living on $1-$2 that the strategies that development agencies think work will actually help. I like to think of the example of agricultural production. Several studies have shown that poor farmers will not use new crops or new techniques until they see that it works for others like them. With crops you can show that fertilizer increases yields or that farm profits increase with growing pineapples in a year or two. With bed nets and school two items mentioned in the post it is really hard to convince people they work, since the benefits are hard to observe.

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Monday, May 24, 2010

The Economics of Daycare and Douglas North

Below that’s a picture of my daughter Sylvia and me reading a book about farming. Taking care of Sylvia has taken precedence over taking care of the blog for the last six months. Today, however is Sylvia’s first day at daycare. So in her honor here is a post on the economics of daycare.

One thing I have been thinking about lately is how pre-school and daycare might be part of a national development strategy. I’ve been participating in a couple of seminars at the InterAmerican Development Bank on early childhood development. In the US there has been a growing body of evidence that early interventions before kindergarten have a huge payoff for the individual child (a previous post). At the seminar one participant mentioned that the payoff to daycare often isn’t in terms of test scores in math or reading, but that it increases children’s ability to socialize when they get older.

Douglas North, a Nobel Prize winning economist, theorized that much of economic development is based on the institutions and social norms that a society forms. These social norms will certainly play a role in what is taught in daycare. I wonder if it might work the other way around, if daycare increases in a country could it improve how people get along and trust each other thirty years later. It’s a hard empirical question to answer, but if as North points out trust is central to economic development and early childhood development formed in daycares shapes the ability to trust then it might follow that daycares are a driving force of a country's economic development.

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