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Truck and Barter Where Sympathy and Hedonism Collide |
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Kevin
Greenspan's Cost-Benefit Analysis Sometimes Mr. Greenspan speaks his mind clearly. Today he said that monetary policy is nothing but an enormously complex and continually-updated cost-benefit analysis (CBA):
In essence, when choosing to do anything, the Fed limits its policy options based on the admittedly shaky results of formal economic models, and then add their own informal judgement on top of it. I can't speak for the relative efficiency of economic policy using CBA as opposed to simple rules, but Mr Greenspan does:
But formal economic models, with their constant linear assumptions, are just far more complex--and malleable--rules. You give them inputs (like overnight lending rates and inflation), and they give you outputs (like GDP growth). Models are sets of mathematical equations. If you give them the same exact inputs, they'll always give you the same exact outputs. In Greenspan's mind a "simple" rule gives you no flexibility to see how different inputs give you different outputs. But I'd rather think that a simple rule states the optimal input--no matter your prior belief in the structure of the economy. The simple rule states that some things work better if not controlled. That's a very simple equation; and it implicitly states that your complex models are wrong. As Chairman of the Fed, Mr. Greenspan uses his complex models to balance the catastrophic cost of a low-probability event like a deflation-induced depression against what he must believe is the low cost of a very low but guaranteed persistent inflation. But he still realizes that simple rules can be correct in the long run:
I have no idea how the Fed quantifies the cost of the continual rise in the price level, but I'd love to see that someday.
8/29/2003 04:07:24 PM
BY
Kevin
Arnold's Lack of Figures
Is it that we don't care about government figures, or don't believe the candidates who provide them?
8/22/2003 09:41:33 AM
BY
Kevin
A Marshall Plan for the Old People
John Tagliabue reports in The New York Times that many French believe that the unfortunate deaths of 5,000 to 10,000 French elderly in the recent heat wave were the fault of the national government--not the families of the deceased:
Pascal Champvert, the president of the French umbrella organization of homes for the aged, said, `'One has the impression that only now France is discovering its elderly."
He refused to blame families, saying in an interview with Le Monde that French society was responsible.
"The government presents the problem as if the solution were private," he said, but the response had to be "collective, by means of taxes and contributions."
To pretend that individuals could have done nothing to help the elderly is just pathetic. Mr. Champvert, president of Adepha, a group trying to represent all the old age homes in France, is a using the unnecessary deaths of people in their own homes to justify an increase in government contributions to the eldercare businesses he represents. He wants more money, and more elderly under their care.
The interview in Le Monde that quotes Mr. Champvert and others trying to avoid blaming the families is auto-translated by Google here. Here's more from Mr. Champvert:
To face the total problem of the old people, Mr. Champvert claims a true "Marshall plan" for the old people. "a true start is necessary: it is radically necessary to change policy of the old people. One needs an ambitious plan ", exclaims the president of Adehpa, which estimates that " 7 billion euros " would be necessary in the long term. The professionals would also wish that the president of the Republic make old people a national priority as well as the handicapped people.
8/21/2003 04:04:53 PM
BY
Kevin
David Brooks--Meet 4600 Duke Street I read with astonishment David Brook's mostly accurate but troubling assessment of the state of racial integration today. His comments were for me a good follow-up on my earlier thoughts about diversity:
Mr. Brooks, come to my apartment building, 4600 Duke Street. Just ride the elevator up and down for 10 minutes, and you'll find that integration you're looking for. Our ~350 studio to 3 bedroom apartments cost from 75K to 150K, in an area where a small rambler goes for 350K--so we're not the rich folk you seem to know. We're officers in the military, students, taxi-cab drivers, maintenance men, secretaries, waitresses, local politicians, and even doctors. Some of us have kids, some don't, and many live alone. We come from all corners of the earth, with diverse racial backgrounds, with a panoply of languages and religions. Some of us rent, most of us own. No one group dominates another. Also, most of us don't know one another--and we like it that way. There is a difference between those people you live next to and those with whom you socialize. The diversity of 4600 is in many ways, a surface-level integration. However, in other ways, it's real. In a diverse community like 4600, ethnic and racial segregation within groups is the norm, but not an uniform, iron-clad law. For the most part, we didn't choose to live together. We chose to live in 4600 because its low price, spacious rooms, large windows, and convenient close-to-DC location present an affordable housing alternative. I can't imagine any of us chose 4600 because of its diversity. On the contrary, many chose it because it's large size means there are significant populations of their own ethnic or religous group. They would agree with Brooks, "What we are looking at here is human nature. People want to be around others who are roughly like themselves. That's called community." Many extended families own multiple apartments, and see 4600 as a means of keeping close together. There are tensions at 4600. I've been called a racist immigrant-hater because I repeatedly asked my non-white immigrant neighbor to lower the volume on her television after 11PM. She soon learned that my wife is an immigrant, and that in the end, I care not a whit about her race, nationality, or religion--only about her civility. We still say nothing to each other if we meet in the hallway. But most people are cordial and very friendly. Brooks asks, "Look around at your daily life. Are you really in touch with the broad diversity of American life? Do you care? For me diversity is at arm's reach, and I find that despite my interest in other cultures, I leave other people alone almost all of the time, and I would say that other people are not missing out too much by keeping mostly to themselves. I am not Commodore Matthew Perry who quietly threatened Japan if it would not open for trade. I know that many people don't want to trade their personal lives. I'm all for diversity, as long as we can find it in our own ways, and we're not required by intellectuals to feel guilty about leaving each other alone.
8/20/2003 12:08:27 PM
BY
Kevin
More on Disposable Cameras Jonathan Gewirtz responds to my objection below. I'll think about his comments for a while and reply later. Until then, I want to share some more information on digital disposables. First, in addition to Ritz Camera, Walgreens also has a digital disposable camera--in fact it's the same camera! Also, this article states that my optimism about a growing disposable market is incorrect:
And I've found data on single-use camera sales that tell an interesting story:
That sales in dollar terms are decreasing, but sales in unit terms are increasing, tells me that competition (and innovation) are very strong in this market. According to the source of the data, "Much of this [unit] growth is due to the approximately 9 percent of U.S. households that now use one-time-use cameras exclusively for all their picture-taking activity." Presumably they're also attracted by the decreasing prices... What I really want to know is why people use disposable cameras? Why is this such a large part of the overall photo market? For events such as weddings, where single-use cameras can be placed at each table, there seems to be no easy replacement. If a lot of usage is a matter of convenience, then I would say that the rent-a-camera market will not easily replaced even by cheaply-owned digital cameras. I think the data I need to resolve such questions is held in Chapter 4 of the 2003 US Consumer Photo Buying Report, but you have to be a member to the Photo Marketing Association to access it. Readers might also be interested in some history. According to this site:
See also Part1 and Part2 of a negative digital disposable user review.
8/20/2003 05:17:00 AM
BY
Kevin
Digital Disposables Jonathan Gewirtz over at Chicago Boyz has a fine post on Ritz Camera's new disposable digital camera. He writes:
I'm going to take a contrarian point of view on this one. There are positive reviews out there, most notably this one, in which the author writes "Dakota Digital meets and beats single-use film cameras in both convenience and flexibility..." However he also writes, "My informal test results were mixed." To me the disposable digital camera is better marketed as a competitor for the disposable film camera, rather than as a film-to-digital crossover aid. As in everything, there are tradeoffs between digital and film disposables:
There are two ways I see that Ritz can make money with the digital disposable model; both require lowering the total costs of disposable camera renting and printing. The first cost savings will come from the elimination of film development. The second could come if inspecting and reusing the "disposable" camera is cheaper than making a film throwaway. I think this will be profitable only when they 1) upgrade the picture quality to meet disposable film camera standards, and 2) get enough volume to pay off their fixed investments in technology. Jonathan also writes:
I understand this argument, but I think about the market differently. Consumers are already renting a particular technology (disposable film cameras) because they find it cheap and convenient to do so. The existence of digital cameras that people can own has not changed their minds. (In fact, since 19% of all film developed is from single-use cameras, customer demand to rent disposable technology is high). Do customers who want the convenience of a disposable camera care how their pictures are stored inside the camera? If Ritz can come up with a similar quality and lower cost alternative to disposable film cameras, I think the company will succeed. Also, if Ritz comes up with a LCD-screened and higher picutre quality throwaway camera for the same or slightly higher price than film, I think they will succeed. In my mind, if customers want digital-camera features in a disposable, they will be willing to pay for them.
8/19/2003 05:08:41 PM
BY
Kevin
So-Called Globalization Vladimir Putin wants even more political control over former Soviet Republics. Hence, his attempt to get Ukraine, Belarus, and Kazakhstan to sign a "free trade" pact:
What Putin means by "differences in approach" are the different political and financial interests of the oligarchs who dominate all of these countries. What free trade means to this elite will always be unclear. Still, you have to like Putin's intelligent usage of the (translated) phrase "so-called globalization" against the anti-globalization crowd who customarily use it in childish mockery.
I'll believe it when I see it. Currently, there is no free movement of labor within each of these countries--not to mention the difficulties in moving (legally) from one country to the next.
8/14/2003 01:33:29 PM
BY
Kevin
Bandwith via Snail Mail Check out Naval Ravikant's opinons about Video-on-Demand and NetFlix on VentureBlog: Never underestimate the bandwidth of a truck full of DVDs speeding down the highway.
8/14/2003 11:29:11 AM
BY
Kevin
Suburbs and Schools Laura Mansnerus writes in The New York Times that:
Here, economics can be used to emphatically disagree. The suburbs are not "out of phase"--unless you ignore the "family welfare" component of the public school system. In my view families with school-age children use public schools as one means to redistribute income from tax-payers without school-age children to themselves. When other people pay for their kids' schooling, parents leave themselves with more disposable income. Families with school-age children moving in to a neighborhood would not cause a fierce reaction if they were allowed to exclude their children from public schools (and school taxes), and pay their own way. However everybody seems to have come to expect other people to pay for their kids' education. Suburbs that operate "free" public schools are getting exactly what they wanted--affordable K-12 education for all local children. It should not surprise them that people are taking them up on their offer.
Havens for families are expensive to run, but we are kidding ourselves by focusing primarily on how much schools cost to run. The real divisive question is who is paying for whom. Perhaps rising tax bills will making us consider alternative models of education allocation and financing. Probably not:
Urban experts and politicians say it is a problem that communities will wrestle with for years.
This should keep the federally-funded education researchers going for a while. OK: The article cited above was really about how local governments are using zoning laws to exclude families with children from their communites, by not permitting the construction of housing such families generally desire. I think that such local zoning maneuvers, while truly ugly and pathetic, are the clear (though unintended) consequences of 1) using taxpayer subsidies to force the market price of K-12 education far below willingness to pay, and 2) the perceived (or actual) degradation of school quality in more urban areas.
8/13/2003 12:04:15 PM
BY
Kevin
Baby Boy Brancato I would like to announce a new trader in the global economic marketplace. Michael Kevin Brancato was born on August 5 at 23:10. He and his mother are well. If Michael could stop sucking on everything and anything, he would thank you all for your advice, encouragement, and concern. He's just out of the womb, and already propping up Consumer Spending. My week-long absence from T&B is now at an end. Look forward to new posts very soon. Once I finish my exams, posting should come at least 5 times a week.
8/11/2003 01:11:13 PM
BY
Kevin
Consumer Product Price Histories Shopping online can be a learning experience--in either a good or bad sense. For me the best place to shop online is NexTag. This company is one of the many "marketplace" websites on which consumers can search for the lowest current market prices on consumer durables. Like competing sites, Nextag lets shoppers review each product and the stores from which they've purchased. Most reviews are sensible and thorough; just like on Amazon, you can vote for which reviews are best.
I think this is really neat. Here's the low-price history for an 80GB Maxtor Internal hard drive. Of course the drastic decline in price is not representative of all products, but it's not uncommon either. Economists tend to focus on "the price" of a product, instead of the more realistic price "swarms" or distributions one finds in the real world. To assist us economists, Nextag lets us drill down for more detail--with the low, high, and median prices. These sites have unified formerly segregated consumer marketplaces in the US and Canada--especially for consumer electronics. Searching for a popular product--like a camcorder or camera--will yield dozens of stores selling it. Searching for an unpopular product--like printer toner--will yield several stores at most. Nextag also provides a graphical history of the number of stores selling the product.
I would also like to note that graduate students in economics have no formal theoretical explanation for the continual decrease in prices, although we have a good story: the introduction of continually better products, or of the same-quality products made more cheaply, drive down the relative value of the older products to consumers. The business model of Nextag is clear. Nextag, itself, makes money from selling advertisements and slots to "featured stores". It may or may not get a cut of the sales made by linking from their site--I don't know. UPDATE: Calibex is a twin-sister site of NexTag. It provides the same information, from the same database, solely with a different face.
8/2/2003 08:35:14 AM
BY
Kevin
The Price of Pot in California Sometimes the most accurate empirical data are anecdotal:
Evan Kirchhoff writing about medical marijuana on 101-280.
8/1/2003 07:19:23 AM
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