Month: January 2005

Price Discrimination via Product Design

Here are some nice examples from the Wall Street Journal of how firms alter products, sometimes making them worse at some expense, in order to increase the potential for price discrimination.

To save money, Chris Caine, a resident of Fiji, always orders
computers made by Apple
Computer
Inc. from the U.S., where they are significantly cheaper. Recently,
he purchased Apple’s newest desktop, the iMac G5.

Soon after the computer arrived from the U.S. he plugged it in.
There was "a big bang, like an explosion, and white smoke out of the speaker
grilles," he says. The machine then died.

Mr. Caine didn’t have a defective unit. It turns out that, unlike
the 17 other Apple computers that he had purchased in recent years for his
DVD-rental business, the new iMac G5s sold in the U.S. are designed to work only
with the electric power systems in the U.S. and Japan…The iMac G5s Apple sells everywhere except the U.S. and Japan are dual voltage,
meaning they can cope with the electrical systems in Fiji, Europe and most of
Asia, as well as those in Japan and the U.S….

H-P has quietly begun implementing "region coding" for its highly lucrative
print cartridges for some of its newest printers sold in Europe. Try putting a
printer cartridge bought in the U.S. into a new H-P printer configured to use
cartridges purchased in Europe and it won’t work. Software in the printer
determines the origin of the ink cartridge and whether it will accept it.

Opposition to Pareto improvements

Ethics campaigners today criticised a 66-year-old Romanian academic for becoming the world’s oldest woman to give birth.
 

Adriana Iliescu, who was artificially inseminated, delivered her baby girl Eliza Maria by Caesarean section on Sunday.

 

Josephine Quintavalle, director of the campaign group Comment on Reproductive Ethics, said women should be outraged by the news.

 

“A woman at grandmother age shouldn’t be having children. I can see no justification in this,” she said…


“It’s the whole concept of IVF. It started off as as fertility
treatment for couples who couldn’t conceive. It’s become a technique
that you can buy into whenever you like.”

Some countries in the world may be overpopulated, but Romania is not one of them.  Here is the story.

Why I worry about essays for the new SAT

An essay that does little more than restate the question gets a 1. An
essay that compares humans to squirrels — if a squirrel told other
squirrels about its food store, it would die, therefore secrecy is
necessary for survival — merits a 5 [a good score]. Brian A. Bremen, an English
professor at the University of Texas at Austin, notes that the writer
provides only one real example. Nevertheless, he says, the writer
displays "a clear chain of thought" and should be rewarded, "despite
his Republican tendencies."

Read more here.

The tsunami: how much was bureaucracy at fault?

Red tape stopped scientists from alerting countries
around the Indian Ocean to the devastating Boxing Day tsunami racing
towards their shores.

Scientists at the Tsunami Warning Centre
in Hawaii – who have complained about being unable to find telephone
numbers to alert the countries in peril – did not use an existing rapid
telecommunications system set up to get warnings around the world
almost instantly because the bureaucratic arrangements were not in
place.

Senior UN officials attending a conference in Mauritius
of small island countries – some of them badly hit by the tsunami, now
recognised to have been the deadliest in history – revealed that the
scientists did not use the World Meteorological Organisation’s Global
Telecommunication System to contact Indian Ocean countries because the
"protocols were not in place".

The system is designed to get warnings from any country to all other nations within 30 minutes.

It
was used to alert Pacific countries to the tsunami, even though it
affected hardly any of them, and could have been used in the Indian
Ocean if the threat had been from a typhoon, officials said, but it
could not be used to warn about a tsunami.

Dr Laura Kong, the
director of the International Tsunami Information Centre which monitors
the warning system in Hawaii, said: "The [meteorological
organisation’s] system has been set up but the protocols are not
available for tsunami warnings except in the Pacific. So it was used on
26 December but only in the Pacific."

Here is the full story, from The New Zealand Herald, which I have generally found to be a reputable paper.  I urge readers to be careful in interpreting this report.  I would like to see further information, including a response.  Nonetheless the previous major accounts did not point to this particular problem.

How to help tsunami victims

Will Wilkinson writes:

…there is something more we can do that will have long-term
positive benefits for the citizens of tsunami-battered
nations–something that will buy us goodwill but cost us almost nothing.


Let them work in the U.S.
(emphasis added)

Here is the full argument.  Not only are the migrants better off, but they can send remittances back home.

Markets in everything

Textiles are getting smarter, as companies weave tiny sensors into
fabric to gather and distribute information about the human wearing it.

Philips, the Dutch multinational, has developed a line of underwear,
bras and accessories containing tiny electronic devices that monitor
heart rates, body temperature, insulin levels and other parameters.
When some measure goes awry — think heart attacks or strokes — your
boxer shorts call an ambulance.

Philips expects the product to be widely available in Europe by the end of 2006.

Germany’s Infineon Technologies offers something called a
thermogenerator, which measures the difference between body temperature
and the temperature of the garment. Too cold or too warm? Your shirt
will be able to fix it.

Then there’s the "joy dress," which has been prototyped by Alexandra
Fede, an Italian designer. It massages women as they wear it, again via
tiny sensors and a programmable microchip in the fabric.

The ideas are coming fast and furious. Orvis has a hit with its Buzz
Off line of clothes, which emit insect-repellant scents (from $18 for
socks to $170 for a jacket). Fly fishers like them, but so would people
in malaria-ridden neighborhoods.

Here is the full story.

Blink

In one study we were watching newlyweds, and what often happened with the couples who ended up in divorce is that when one partner would ask for credit, the other spouse wouldn’t give it.  And with the happier couples, the spouse would hear it and say, ‘You’re right.’  That stood out…for a marriage to survive, the ratio of positive to negative emotion in a given encounter has to be at least five to one.

That is one early passage from Malcolm Gladwell’s new book Blink: The Power of Thinking Without Thinking.  So far I find the book intriguing but once I have read it I will offer a less accurate evaluation.

What is blogging for?

One of the key questions here (“loose concept/sliding metaphor” alert) is whether the blog is actually ventilating. Anyone can build a little world sui generis. Just bang away at our favorite topics often and at length, and Bob’s your uncle. But good blogs inhale data before they exhale comment. And we expect them to address the big issues in a timely fashion (the presidential elections, say) even as they show a certain imagination and versatility in finding issues not now on readers’ radar.

A friend at Cambridge did his thesis on the epic poem and he was particularly interested in the notion of the “sustain.” Could the poet sustain themes in large and small over the vast architecture of a poem? And this is an issue for blogging. Some people are entirely without themes and pretty completely episodic. Others are the captives of a few mighty themes and their slavish repetition. All of us hope for a sweet spot: a body of smart and various themes that organize without compressing discourse, that give us analytic range without costing us focus, that give the blog an exoskeleton without specifying what it must look like day to day.

To put the matter more honestly: every little blog is buffeted by the high winds of a dynamic culture even as it has its favorite “go to” ideas with which it is most comfortable making sense of the world. This is, I think, pragmatic sweet spot of the blogging world. The real challenges here I guess, is constantly to cultivate and enlarge the “go to” ideas without taking on or foreswearing too much of the world in the process. Our sweet spot should be the smallest, most powerful ideas that illuminate the largest, most various parts of the world most cleanly. I do realize there is a notion of parsimony here that the po mo party no longer cares about or thinks possible. But it is worth pointing out that it is precisely this parsimony that gives a blog its claim to something like an identity and a readership.

Finally, blogs are tests. Can the blogger sustain a discourse that is recognizable but cannot be anticipated, in which utterances play back constantly in the reformation of the code from which they come, over a set of applications that is neither too small or too large, out of which emerges a way of thinking that draws from, touches on, but does not duplicate other players in the field, in the creation of an “idea space” that is disciplined and reckless, venturing and themed, marshaled and fecund, and finally getting some where? This is hard and this is the test of blogging.

That is the ever-stimulating Grant McCracken (there is more at the link), here is his blog.

Medical mistakes

More people die from medical mistakes each year than from highway accidents, breast cancer, or AIDS and yet physicians still resist and the public does not demand even simple reforms. 

The New England Journal of Medicine, for example, has just published another study, as if we needed it, showing that interns who are kept awake for 30 hours straight
are a danger to themselves and innocent bystanders as well as to patients:

Researchers found that interns more than doubled their risk of getting into a
car accident after being on call, a stint that meant working for 32 consecutive
hours with only two or three hours of sleep, on average. Interns were also
nearly six times as likely to report nearly having an accident on their way
home.

….The researchers say those limits don’t give doctors enough time to sleep.
A study published last fall, also in the New England Journal, found that interns
who spent every third night working in the intensive care unit made 36% more
medical errors than interns who kept less onerous schedules. They also made
serious diagnostic errors 5.6 times as often as their well-rested counterparts,
the study found.

I will just quote Kevin Drum on this:

I’ve heard a litany of defenses of this practice from senior medical folks,
and they couldn’t sound more lame if they tried. They sound like nothing so much
as a bunch of 50s frat boys defending hazing after some freshman has been found
dead in an arroyo somewhere.

It’s unbelievable that this system has continued as long as it has and
unbelievable that it continues to be defended. Do we really need studies to tell
us that people who have been awake for 30 consecutive hours probably aren’t
making very good decisions? And that both patients and others are suffering from
this?

Would you want your mother to be looked after by a trainee who’s been
on her feet for 30 hours? I wouldn’t.

What countries are undervalued?

At the AEAs Tyler and I would ask our job candidates what countries do you think are currently overvalued and what countries do you think are currently undervalued (in terms of growth prospects, reasons for investment optimism etc.)  Many candidates were surprised by this question.

Of those able to give an answer, China was repeatedly picked as overvalued as to a lesser extent was Argentina.  Good reasons were given for both cases.  Fewer people were able to articulate a case for undervalued nations.  My own pick for undervalued nation was Germany while Tyler chose Mexico.  No one thought that Iran, Iraq or Saudia Arabia was undervalued but these are the surprising picks of
Glenn Yago and Don McCarthy writing in today’s Wall Street Journal (and available online here).  Yago and McCarthy point primarily to rising stock markets but also increased FDI:

Regionally,
stock markets rose over 30% in 2004 and represent a market
capitalization of $470 billion. This has been accompanied by a surge in
regional property values and a higher number of tourists. The main
Egyptian equity index has increased 165%, while that of Saudi Arabia
has gone up by 158%. The Saudi market’s stellar performance is
especially striking given the great amount of attention paid at the
moment to that country’s security problems. Israel’s leading index has
risen by 32%, the benchmark index of Kuwait’s exchange by 73%, Jordan’s
by almost 60%, and that of the United Arab Emirates by 110%.

What countries do you think are overvalued or undervalued and why?  I have opened the comments section up for this post.

In defense of Wikipedia

Wikipedia has come under increasing criticism lately, for instance read here.  The core problem is simple: for most entries, anyone can write anything.  How can you trust the results?  For that matter, what does the Nash equilibrium look like?

But this critique misses the comparative advantage of Wikipedia.  Entries tend to be link-rich, and the ongoing debate and revisions refresh and improve the links.  Think of Wikipedia as hiring someone to do search engine work for you, not just Google but the other brands as well.  They then report back with the best links.  Wikipedia brings you this service for free.

In turn Wikipedia writers receive the satisfaction of being read and of participating in the grand endeavor. 

If you unconditionally trust controversial assertions in Wikipedia, you need to be much more careful.  But if you think of the service as an exchange of sorts, and understand what you are getting, Wikipedia is a remarkable benefit.   

Read Clay Shirky as well; he notes that while Britannica gets worse over time (ever read an old edition?), Wikipedia gets better over time.

Sexy women

In a recent survey across 10 countries, British women proved to have the least faith in themselves – or more precisely in the way they look. Only one in five said they saw themselves as attractive, while only one in 50 described themselves as "sexy".

Here is the story, and more detail here.  The women with the most confidence in their looks are, not surprisingly, the Brazilians.

Thanks to www.politicaltheory.info for the pointer.  While we are on the topic, Daniel Akst directs my attention to more:    

US researchers got 149 men and women to rate the attractiveness of a series of recorded voices.  They found the most appealing voices belonged to people who had sex at an earlierage, had more sexual partners and were more prone to infidelity.  The team at the University of Albany also said there was a link between the attractiveness of the voice and body.  In the study, men with broad shoulders and narrow hips, which are related to testosterone and growth, also tended to have attractive voices.  In women voice attractiveness, which was rated between one and 10 in the study, was linked to a narrow waist and broad hips.  Report co-author Gordon Gallup, from the author Gordon Gallup, from the New York university’s department of psychology, said: "In short, ratings of voice attractiveness are correlated with promiscuity in both men and women.

Who is James Buchanan?

James Buchanan was asked to define himself in a single paragraph, here is the result:

When
all is said, I have faced few genuine choices between work and play
because there is really no distinction.  My work is my play, and I am
surely among the fortunate in this as in so many other aspects of a
happy and well-ordered life.  I have not been plagued by psychological
hangovers that make me try to respond to the "whys" of existence or the
"whats" beyond.  I hope that I seem what I think I am: a constitutional
political economist who shares an appreciation for the Judeo-Christian
heritage that produced the values of Western culture and institutions
of civil order, particularly as represented in the Madisonian vision of
what the United States might have been and might still become.  Am I
grossly naive to think this definition is sufficient unto itself?

That is from Ideas, Persons, and Events, volume 21 in the collected works of James Buchanan, published by Liberty Fund.  This book is remarkable fun, and costs only $12.00, recommended.

Behavioral economics models I would like to see more of

Alex and I learned during this weekend’s job interviews that behavioral economics remains "hot."  Frequently a behavioral model will find some imperfection in individual choice or aggregate market outcomes.  Behavioral economics often is used to argue for paternalism, for the relevance of sticky wages and prices, and against the efficiency of asset markets.

I’ve been a fan of behavioral economics from the beginning, as you might expect from a former student of Tom Schelling’s.  But behavioral economics has overemphasized market failure at the expense of government failure.  I would like to see more behavioral investigations along the following lines:

1. A productive entrepreneur exploits behavioral imperfections to defeat a blocking coalition.

2. A market that would otherwise have no equilibrium "core" in fact becomes quite stable, due to behavioral frictions.

3. A politician self-deceives and builds a self-aggrandizing "empire" rather than serving the median voter.  Voters know that the potential political competitors will end up doing the same, and so they accept this tendency.

4. Median voters pick politicians on the basis of looks, height, or behavioral quirks, not expected policy or past performance.

5. Behavioral models often stress how choices can make people worse off.  How about a model where welfare payments lead to a breakdown in self-restraint and community?