Month: December 2004

Space matters: why new gadgets come from Asia

Japanese manufacturers became experts at miniaturizing and creating multiple-function devices (like, say, refrigerators that let you browse the Web) simply because the average consumer really needs the room. "Space is everything," says Farber. "Many years ago, I sat down with a person — an American — who was trying to sell telephone extensions into the Japanese market. His sales pitch was that every family needs five phones — one for every room in your house. Japanese people looked at him and said, ‘Well, my apartment is so small that when my phone rings, I just reach across the room and pick it up.’ He wasn’t doing so well."

There’s a subtle secondary manner in which real estate prices have shaped consumer behavior in Japan: housing is so expensive that young people have virtually no means of renting or owning their own homes; even after they’ve joined the workforce, they continue to live with their parents for years or even decades after graduation. Given that the average American spends up to one-third of his or her take-home wages on shelter, by sponging off Mom and Dad, young Japanese men and women have significantly more disposable income to spend on themselves; a $600 Louis Vuitton purse — or a $3,000 ultrathin 1.2-pound laptop — becomes instantly affordable when you’re living rent free.

Here is the full story, courtesy of  And don’t overlook the key role of Japanese schoolgirls:

"A couple of months ago, Newsweek Japan did a special issue that listed the 100 most influential Japanese people in history," says Douglas Krone with a chuckle. "Along with ancient emperors, best-selling authors, inventors and scientists, they listed ‘Japanese Schoolgirls,’ because they’ve been so influential, inside of Japan and out."

China fact of the day

…at $1.2 trillion, Italian GDP is roughly the size of China’s, and Italy’s total foreign-trade value of $750 billion is only slightly smaller than that of the mainland.

The bottom line: Yes China is an important country, but we should keep matters in perspective. [Question — hey, then why don’t you have an "Italy fact of the day" installment? — Answer — because China has started selling soy underwear.]

The quotation is from today’s Wall Street Journal, Op-Ed page, "Yuan-derful," and see the Marketplace section on the soy underwear.

The ice trade

By the 1830s ice had become a very profitable American export.  In 1833 American ice was being shipped as far as Calcutta, when the Tuscany, which had sailed from Boston on May 12, reached the mouth of the Ganges on September 5.  Calcutta, one of the hottest and most humid cities on earth, and then the capital of British India, was ninety miles up the Hooghly River, and the population awaited the ice with breathless anticipation.  The India Gazette demanded that the ice be admitted duty free and that permission be granted to unload the ice in the cool of the evening.  Authorities quickly granted the demands.  Frederic Tudor managed to get about a hundred tons of ice to Calcutta, and the British there gratefully bought it all at a profit for the American investors of about $10,000.

By the 1850s American ice was being exported regularly to nearly all tropical ports, including Rio de Janeiro, Bombay, Madras, Hong Kong, and Batavia (now Jakarta).  In 1847 about twenty-three thousand tons of ice was shipped out of Boston to foreign ports on ninety-five ships, while nearly fifty-two thousand tons was shipped to southern American ports.

That is from John Steele Gordon’s An Empire of Wealth: The Epic History of American Power.  This new book is the best single volume treatment of American economic history I have read, highly recommended.  Here is a review, and note that the book’s perspective is Hamiltonian, not Jeffersonian.

And here is more on the ice trade.  Here are good photos of the Norwegian ice trade, and yes they were exporters not importers.

Agnes Martin passes away

One of my favorite contemporary painters, Canadian-born Agnes Martin, just died at the age of 92.  Her soft colors and straight lines did much to bring beauty back into art.  She was no minimalist but most of all a believer in spirituality and the pure aesthetic.  Here is the story.  She lived a secluded life and had expressed a desire for no obituaries, but here is one nice painting by her.  Here is a nice print.

Economic gossip from The Financial Times

Senior Republicans sounded out Alan Greenspan, chairman
of the Federal Reserve, about taking over from John Snow as US Treasury
secretary, the Financial Times has learnt.

The informal approach, which would have put the most respected economic
leader in the US in charge of President George W. Bush’s ambitious
second-term domestic agenda, was declined.

The approach to Mr Greenspan made at arm’s length from
the White House reflected concern that Mr Snow was not the most
effective champion of Mr Bush’s agenda.

In a separate effort to
strengthen its economic team by bringing in a Fed policymaker, Ben
Bernanke, an influential Fed governor, is the leading candidate to
replace Greg Mankiw as chairman of the White House Economic Advisers.

Here is the story.

Chile fact of the day

Percentage of Chileans retiring over the next thirty years who are expected not to save enough to participate in Chile’s privatized social security plan:

"almost fifty."

By the way, they are all likely to receive governmental welfare of some kind.  Don’t think that social security privatization in the U.S. will eliminate a comparable issue closer to home.  Of course we are a wealthier country but we also have higher standards for treating our elderly.  If you favor privatization, you favor in reality privatization plus a supplemental support system from some level of American government; add this into your costs.  Read Will Wilkinson on this point.

Here is the on-line version of the Chilean article, read here also.  Both pieces provide good coverage of the Chilean experience, and in my view a balanced treatment.  Read also my earlier post on the preconditions for successful Chilean reform.

(un)Real Estate

An island has just been sold, it consists of 6000 acres, a castle, a mine and the right to subdivide and sell ocean-view lots.  The price, a mere $26,500.   Cheap?  Maybe if it existed in the real world but this island is the most expensive piece of unreal estate yet to be sold – it exists only as part of the computer game Project Entropia.

I must admit to still being surprised by stories like this but I cannot imagine that I will think so in another few years, even less that my sons should not think this all perfectly normal.  My prediction: within two years expect to see a bitter divorce battle fought over who gets the house – the virtual house.  And within four years expect a bitter divorce battle fought over who gets the kids.

Thanks to David at Cronaca for the link.

Underappreciated economists, a new installment

Brian Loasby.  He has been a Professor of Economics at the University of Stirling, now emeritus.

I read Loasby’s Choice, Complexity, and Ignorance (alas, not to be found in Loasby’s Amazon list) at a very young age.  Here was an "Austrian" theory of choice and the firm that was both dynamic and had empirical content.  Who else started with Marshall and Joan Robinson but integrated Lachmann, Cyert and March, and the best of institutionalist thought, all without falling in dogma?  Loasby also embodied the kaleidic best of G.L.S. Shackle without flying off the rails into analytic nihilism.  If you want a phenomenological description of how firms deal with radical uncertainties about the future, this is the place to go.

Here is an interview with Brian Loasby.  Here is one nice bit, intended as a general point but also in defense of Marshallian reasoning:

I have never been able to question very much at a time, I think.  I got a note somewhere of something that G.K. Chesterton once said, that a man must be orthodox on most things, or he will never have time able to practice his own particular heresy.

China fact of the day

It is not just LeBron James who is banned in China:

Cyndi Lauper suffered [censorship] when the censors decided her song "I Drove All Night" sent our a potentially dangerous message to motorists…

Yet copies of [this track are] available in China if you look hard enough because a staggering 95 percent of music sales are pirate copies…In fact, the government’s insistence that any foreign record label must submit for approval a translation of all lyrics is partly blamed for fueling the illegal trade.

Here is the full story, FT subscription and password required.  And read my earlier post on how censorship and cultural protection make legitimate copyright harder to enforce.  Not to mention this earlier post on why Cyndi Lauper is so much to blame.

Addendum: Chinese censors are now pondering a naked Pam Anderson.

Paying for Kidneys

In a new paper, Gary Becker and graduate student Julio Elias estimate that for a price of $15,000 the shortage of kidneys could be eliminated from live donors.  The risk of death to a live donor is no more than 1 in a 1000.  Combine this with a value of life estimate of $3 million and add in some costs for time off work and so forth and you get the Becker/Elias figure of $15,000.

$15,000 seems too low to me but it probably would since my income is above average. As a robustness check, the authors note that in India a kidney can be had for about $1000 and US per capita income is about 15 times that in India so $15,000 looks to be in the right ballpark.  A similar calculation from Iran, where kidney sales are legal, is also consistent.  In anycase, even if they are off by a factor of 2 the point is well taken that for a modest sum many lives could be saved.  (In fact, dollars would be saved also because transplants are cheaper than dialysis.)

Becker and Elias have a useful response to (so-called) moral objections. Take any argument against kidney sales and apply it to the volunteer army.  Do kidney sales "commodify the body?"  Perhaps, but then the volunteer army commodifies life.  Would kidney sales eliminate altruistic donation?  As the example of Pat Tillman and many others demonstrate people still volunteer for the military for non-monetary reasons.  Are there difficulties for donors to calculate risks?  Again, perhaps, but these also apply to joining the military (and if so we could allow for a cooling-off period for both donating an organ or joining the military, as we do in some states for auto purchases).

If you are not in favor of the volunteer army then Becker and Elias don’t have any knock down arguments but I suspect that many people who are against kidney sales also favor the volunteer army and for these people Becker and Elias are posing a consistency challenge.

Markets in Everything – law school

Jay Wilson, a second-year law student at New York University, was
desperate to register for a popular course in constitutional law.

Unfortunately for him, the course, taught by the youthful Daryl
Levinson, was completely booked for the upcoming spring semester.
Fortunately, Mr. Wilson had some money to spare. In a posting on an
online bulletin board at the law school, Mr. Wilson offered $300 to any
student willing to drop the course to make room for him…

Students interviewed at the law school said the practice of
exchanging course spots is common at the school. As a kind gesture,
some cash-strapped students have promised to bake cookies for willing
traders or pass them invitations to exclusive parties.

Mr. Wilson, they said, took things to a new level: a no-nonsense
business deal, the sort of financial transaction that they expect to
deal with only after graduation.

Of course, the authorities soon moved to quash such deals.  The dean, however, did not explain why paying to get into a class is wrong but paying to get into law school is good.  Hmmm….perhaps Mr. Wilson would have had better luck had he offered to pay the dean rather than another student.

I have pioneered this approach even further.  Students in my classes have been known to offer payment to get out. 🙂

Thanks to Ray Lehmann for the link.

Teacher cheating

Steve Levitt is hot on the trail of another scoop:

Along with Brian Jacob, I have written two papers that explore a very different concern regarding high-stakes testing — cheating on the part of teachers and administrators. As incentives for high test scores increase, unscrupulous teachers may be more likely to engage in a range of illicit activities, such as changing student responses on answer sheets, or filling in the blanks when a student fails to complete a section. Our work in this area represents the first systematic attempt to identify empirically the overall prevalence of teacher cheating and to analyze the factors that predict cheating.

…Empirically, we find evidence of cheating in approximately 4 to 5 percent of the classes in our sample…this estimate is likely to be a lower bound on the true incidence of cheating.

Here is a full account, courtesy of Mahalanobis.