I met a guy who has done a fantastic job of building up a department of economics at a major university. He is an impressive administrator, who clearly has both an absolute advantage and a comparative advantage at academic administration. I said that he will surely become a dean, then probably a university president, and would do a great job . . .
A resident of Austin was complaining on a local TV station about continuing energy surcharges — on prices of airplane tickets, electricity, and other things — at a time when oil prices have tumbled. Presumably, instead of raising nominal prices, companies imposed surcharges last year to convince customers that the increases were temporary; but with the average variable cost of . . .
A related set of lawsuits involving billions of dollars has provided employment opportunities for a number of consulting economists specializing in antitrust issues or labor economics issues. I’ve been involved in three of the cases, and they have been great fun (and a good way of paying dental bills). I was crestfallen to find out that I am not likely . . .
There are at least four ways of meeting a decline in labor demand: laying off workers, cutting nominal annual salaries, cutting hires, or reducing hours. It is difficult to lay off tenured faculty; but in this recession, universities are using two other methods of cutting payroll. Some schools have imposed faculty hiring freezes. Others are furloughing faculty: Arizona State, for . . .
Denis Defreyne It’s interesting to see how people’s spending patterns respond to a (presumably) temporary decline in income during the recession. Which items are more or less income-elastic in the short run? A pediatrician friend of ours mentions that he is seeing less business; when there are three kids with coughs, for example, a parent will bring in one, get . . .
Photo: C.P.Storm Every time an opposing player is penalized at a University of Michigan home hockey game, the student fans begin chanting long strings of obscene epithets. After the first few times this happened, the band began playing loud music (lots of drums) to drown this out. This is a repeated game, with the students as the first-mover (strategy: chant/no . . .
Over the past few months, the press has deluged Americans with weepy stories about people who are in danger of losing their houses because their sub-prime mortgages now exceed the value of their houses, which the recession and the popping of housing bubbles have caused to drop. I am sympathetic; and I, and other taxpayers, am being asked to provide . . .
NPR reported last month that, for the first time in five years, the U.S. Army had more than met its recruiting goals. This happens every time unemployment rises, and it should be absolutely no surprise. People choose military service after high school partly out of a desire to serve the country; but there is strong evidence that incentives matter. Higher . . .
In facing the “Buy one, get one free” suit deal, my quick-thinking wife said, “Let’s take the second suit anyway.” She called our older son on her cell phone from the store, as we knew he was shopping for a suit, and he said he was interested.
The store has a branch where he lives, so we are taking the suit to him this week when we visit. He will take it in and exchange it at no cost to himself for the suit he wants. While I would have derived perhaps $50 of consumer surplus from the “free” second suit, a suit’s value to him is at least $300; and with the pick of the store, he’ll buy a fancier suit.
My wife made me give my 12-year-old suit to charity, so I had to get a new one. Men’s Wearhouse had some nice outfits, and I was willing to pay a lot for a good suit.
Top-of-the-line models were available for $600, and they were on sale: “Buy one, get one free.” I was going to buy one even without the sale, and $600 was about what I wanted to spend. But I have almost no use for the “free” suit; I derive little consumer surplus even from a “free” second new suit.
At the annual meeting of the American Economic Association, its president announced that the Clark Medal, presented biennially to the top economist under age 40 (former winner Steve Levitt), will henceforth be given annually. Along with other medals, this will mean that we give up to four medals each year. Sounds like a lot, but in this profession the supply . . .
A story in our local paper talks about the problems of West Texas. This area, the center of the Texas oil industry, is suffering. People are being laid off from the oil fields, because drilling has, as it were, dried up. No surprise: With the price of oil below $40, and with drilling a supply response to shocks that raise . . .
Last night Jay Leno joked that only 500,000 people attended Bush‘s second inauguration, while 2 million were at Obama‘s. The reason, so he claimed, is that we now have so many more unemployed people. Good joke, but is it correct? How do unemployed people spend their time? How does unemployment affect time use in the entire economy? What is the . . .
A friend at another university tells me that his school is banning the sale of bottled water on campus, as the university administration is bothered by the pollution produced by plastic water bottles.
Presumably, they figure that bottled-water consumers will switch to tap water, as tap water is bottled water’s closest substitute. I wonder — aren’t bottled soft drinks a closer substitute? Don’t people want the convenience of a container at their desk rather than an occasional drink at the water cooler (or a cup to be filled at the water cooler)?
A column by Meghan Daum in the Los Angeles Times reports on the dating service Ashley Madison, which matches up married women and men who wish to have a quick fling. The service is a market intermediary for extramarital affairs. Its founder claims that, by lowering search costs for affairs, he enables people in unhappy marriages to stay married. Daum . . .
The Wall Street Journal recently published a front-page story about the estate tax. Under current law (passed in 2001), the tax is scheduled to disappear next year (but come back with a very low exemption in 2011). President-elect Obama will quickly push to abolish the repeal and instead freeze the exemption at $7 million for a couple, with a marginal . . .
A female friend who I hadn’t seen in several months and I greeted each other yesterday with the usual hug and one-cheek kiss. If I had done this in 1970 I would have been looked on as really weird, or I might even have been slapped. The social norm on kissing has changed in the U.S.; and the norm elsewhere . . .
I’m home after five months away, and it’s the first day back in my office. Before 2000, I would have viewed this day with great trepidation — piles of mail, numerous requests to do things for other people (referee papers, write promotion letters, etc.), and the possible heartbreaking rejection of a paper of mine by a journal (or the delightful . . .
Patrons at Cecil’s Jazz Club in West Orange, N.J., savored one of the last nights for smoking in bars and restaurants. (Photo: Marko Georgiev/The New York Times) A journalist writing for the Financial Times complains that Britain’s indoor smoking ban has resulted in more pubs closing and a decline in beer sales of 10 percent. I believe that smoking and . . .
English is everywhere — the lingua franca (should be lingua anglica) of today’s world! Its universal usage minimizes transaction costs in an increasingly integrated world — and that integration has increased interest in learning the lingua anglica. I feel guilty about this, and all American economists should: It’s easier for us to write our scholarly papers than it is for . . .
My Michigan son tells me that the Detroit Free Press will be doing home delivery only three days a week as a cost-cutting measure. I asked him what the source of the difficulty is, and he responded succinctly, “The internet, Dad!” Of course he’s right; internet advertising at least partly displaces print advertising, shifting the demand curve for newspapers leftward; . . .
There is a Catalan custom of men giving women and girls red roses on St. George’s Day (April 23), while women traditionally give men and boys a book on that day.
My guide mentioned that the books are always sold to the (female) buyer at a 10 percent discount below the regular price; when asked whether the roses are discounted, she said, “No way!” Typically most roses are imported for this peak load time from the Netherlands and are even sold at a premium.
Governments intervene in markets all the time — and they should, in order to make markets more competitive; to solve problems of externalities (which are ubiquitous); to resolve difficulties caused by individuals’ shortsightedness, including the spurring of innovation; and to reduce transactions costs. Where does the auto bailout fit in? It certainly doesn’t make markets more competitive; instead it subsidizes . . .
We economists love to talk about Pareto optima and Pareto-improving changes. Frankly, though, when the group of interested parties is considered broadly enough, there are extremely few changes that are truly Pareto-improving. I just came across one. I was scheduled for a seminar next week at the German research institute where I’m on sabbatical; it would have been my sixth . . .
Some Italian professors told me about one of the most bizarre incentive systems in the world. The amount of fees that an Italian university can charge to students is linked to the amount of support the university receives from the national government. Sounds sensible, right? After all, public universities in the U.S. typically try to make up lost state revenue . . .
In the long run, the increasing opportunity cost of people’s time, as wages rise, is one of the most important driving forces in economic behavior. Much of our racing around is due to adjustments to the increasing relative scarcity of time compared to income, as are efforts to introduce time-saving technology. A neat example of such an innovation is the . . .
The free newspaper on the London tube has this front-page advertisement: “From 10 a.m. tomorrow, £10 ($15) hotel rooms, on the web site lastminute.com.” For an economist this is a heartwarming advertisement. Clearly these are hotel rooms that would otherwise go unfilled. While $15 is not much, I would imagine that it is a bit more than the marginal cost . . .
KLM Royal Dutch Airlines is increasing the space between rows of seats on its planes. I’m not surprised — the Dutch are the tallest people on earth these days, as I discovered when I had to crane my neck around the Brobdingnagians in front of me in an Amsterdam movie theater. Like many Europeans, the Dutch are also very concerned . . .
There’s a shortage of sperm in Britain! Apparently, Britain needs donations for about 4,000 women per year; to reach that number, about 500 sperm donors per year are required, while only 300 are currently registered. Things were fine until 2005, when a law was enacted allowing children of sperm donors the right to discover the identity of their father at . . .
The financial crisis is getting all the headlines and, so it is claimed, occupying all the attention of at least one presidential candidate. Yet a bigger economic issue is hardly being addressed: the exploding costs of health care in the U.S., where we spend a far greater share of our incomes on health than people in other rich countries. How . . .
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