Month: February 2015

“I’m sorry, Dave…” (tractor edition, agriculture average is over)

Dave asked me if there was some way to bypass a bum sensor while waiting for the repairman to show up. But fixing Dave’s sensor problem required fiddling around in the tractor’s highly proprietary computer system—the tractor’s engine control unit (tECU): the brains behind the agricultural beast.

One hour later, I hopped back out of the cab of the tractor. Defeated. I was unable to breach the wall of proprietary defenses that protected the tECU like a fortress. I couldn’t even connect to the computer. Because John Deere says I can’t.

There is more here, interesting throughout, mostly about how farmers are no longer able to fix their own tractors, which by the way may cost $100,000 or more. This part is interesting too (“model this“):

There’s a thriving grey-market for diagnostic equipment and proprietary connectors. Some farmers have even managed to get their hands on the software they need to re-calibrate and repair equipment on their own—a laptop purchased from some nameless friend-of-a-friend with the software already loaded on it. There are even ways to get around the factory passwords that block access to the tECU to effect repairs.

But under modern copyright laws, that kind of “repairing” is legally questionable.

Manufacturers have every legal right to put a password or an encryption over the tECU. Owners, on the other hand, don’t have the legal right to break the digital lock over their own equipment. The Digital Millennium Copyright Act—a 1998 copyright law designed to prevent digital piracy—classifies breaking a technological protection measure over a device’s programming as a breach of copyright. So, it’s entirely possible that changing the engine timing on his own tractor makes a farmer a criminal.

In response, there is now a community of farmers looking to encourage “open source tractors.”

If this doesn’t concern you, I can assure you that in South Korea things are even worse.

For the pointer I thank the excellent Mark Thorson.

More on the economics of dessert in decline

Parties that might have finished their dinner in a little over an hour instead linger for closer to two when they opt for dessert. And they stay the extra thirty minutes while consuming only a fraction of what they did during the first part of the meal. It would be different if people ordered drinks more often alongside cake, but they often don’t. It would change things if dessert wines were more popular, finer, and more expensive, but they aren’t, Cowen said.

From Roberto A. Ferdman at WaPo, there is more here.  File under “Oklahoma is different.”

I would add two points.  First, the rise of wait-in-line higher quality casual fast food penalizes dessert, because at say a Chipotle people don’t want to wait in line again for dessert.  Second, a lot of what is consumed at Starbucks and similar outlets is “dessert in everything but name” and that is proving a more popular and durable model for injecting sweets and cream into the body, perhaps because it does not need to be paired with an expensive meal and furthermore it is ever-present in most parts of the United States.

Netflix vs. the media conglomerates

The largest conglomerates are still in the lead:

When we sum up the many networks owned by each media conglomerate, we can see how mighty these giants truly are. Netflix may be the largest “cable channel” by more than 100%, but it ranks 7th among cable television groups. Add in broadcast, and the delta is even greater. Not only is Disney more than three times as large as Netflix, but the OTT service makes up only 5% of total US video consumption per month. It may be that no single channel has the breadth of content and scale to be a serious Netflix competitor, but their parents certainly do.

That is from Liam Boluk.  Here is Boluk on the economics of Youtube: “Felix Kjellberg (PewDiePie) is already more popular than scores of Hollywood TV and film celebrities.”

A Price is Signal Wrapped Up in an Incentive

Here is the second rose video which goes deeper into the meaning and operation of the invisible hand. One warning, however, don’t watch this video while drinking!

All MRUniversity videos are free to use in the classroom. To that end, we have put together a short guide for teachers that suggests some ideas for using the rose videos in class and how one might continue to deepen the lessons.

How much does state population size predict state inequality?

From StatisticalIdeasBlogspot:

Of the top 10 populated states, 5 were also among the top 10 “unequal” states: CA, TX, FL, NY, IL.  Of the 10 least populated states, 4 were also among the 10 least “unequal” states: VT, AK, ME, HI.  So instead of 4 overlapping states, we have a significantly higher 9 (5+4) states overlapping.  Additionally, there are no crossover states (e.g., a highly “unequal” less-populated state, nor a less “unequal” highly-populated state).  The easy math (9>4 with no crossovers) shows something, and it’s not structural inequality.

The only common variable between the selection of the top 10 (and in the selection of the bottom 10) populated states is just population size itself!

There is also a useful map at the link.

Dani Rodrik on premature deindustrialization

Somehow this paper has not been receiving adequate notice (Ryan Avent is one meritorious exception), so here it is:

I document a significant deindustrialization trend in recent decades, that goes considerably beyond the advanced, post-industrial economies. The hump-shaped relationship between industrialization (measured by employment or output shares) and incomes has shifted downwards and moved closer to the origin. This means countries are running out of industrialization opportunities sooner and at much lower levels of income compared to the experience of early industrializers. Asian countries and manufactures exporters have been largely insulated from those trends, while Latin American countries have been especially hard hit. Advanced economies have lost considerable employment (especially of the low-skill type), but they have done surprisingly well in terms of manufacturing output shares at constant prices. While these trends are not very recent, the evidence suggests both globalization and labor-saving technological progress in manufacturing have been behind these developments. Premature deindustrialization has potentially significant economic and political ramifications, including lower economic growth and democratic failure.

I am less sympathetic to industrial policy than Dani is, but still I think there is much to this basic line of argument.  Here is the NBER version of this paper.

Health care cost control sentences to ponder

“I’m always curious when I read this ‘good news’ that health costs are moderating, because my health care costs go up significantly each year, and I think that’s a common experience,” said Mark Rukavina, president of Community Health Advisors in Massachusetts.

Um…how much time with Megan McArdle or Arnold Kling would it take to set him straight?  The full story, of interest on other points too, is here.

Assorted links

1. Is TV the next internet?  And George Selgin reviews Calomiris and Haber.

2. Um vs. uh.

3. Michael Pollan’s piece on psychedelics should win one of those David Brooks magazine awards (“Sidneys”), as it will prove one of the best and most important long reads of the year.  Among its other virtues, it confirms my view that the “psychedelic theorists” of the 1960s and 70s (and sometimes earlier, as with Huxley) remain underrated thinkers.

4. On the changes in China’s intellectual landscape.

5. Trying to test Schrodinger’s cat: do quantum states apply at the macro level too?

6. How many Harvard students actually attend Harvard lectures, or has Harvard already mastered on-line education? (pdf)

7. Proof that the robots are not benevolent.

I, Rose

Valentine’s Day is this week and what better way to celebrate than to appreciate the economics of roses!

A rose isn’t just a symbol of love it’s a symbol of global cooperation coordinated by the invisible hand. In The Price System, the just released section of our principles of microeconomics course, we feature two rose videos (along with videos on the great economic problem, speculation, prediction markets and more). Here’s the first; I, Rose. Tomorrow, A Price is a Signal Wrapped up in an Incentive. Enjoy.

Who are the people I most admire?

Last I looked, Elon Musk was a clear winner of the MR readers’s poll for “most admired.”

Personally, I admire successful creators, scientists, and entrepreneurs a great deal, and Musk fits into those directions very well.  Still, the very top of my personal list would be shaped more by how much individuals had sacrificed.  Let me throw out a few options:

1. The members of the Mexican judiciary who have stood up to the drug gangs, often at the expense of their lives.  They believed in a better future for Mexico and I think eventually they will triumph.

2. Public health professionals who work under great hardship in difficult places, for years, to limit malaria or the spread of Ebola.  In addition to questionable living conditions, they often face high health risks themselves.

3. How about Aun San Suu Kyi, who endured about fifteen years of prison to help bring greater liberty to Myanmar?

4. At a smaller scale, how about individuals who volunteer to work in the burn unit at the hospital?  That has to be fairly icky labor, yet as medical care it can be effective.

You can do variants on my 1-4, but I would start with examples such as those.  Not at the very top of my list, but I also would think about good parents who work as primary caregivers.

If we are restricted to political/public figures, I would opt for Ben Bernanke.

Overall I was surprised how few of you approached the question the way I have, rather as a group you picked too many nerdy white guys.  Now I don’t like to play “the PC card,” and if a process generates a lot of nerdy white guys, I don’t then assume that process is necessarily biased or requiring correction.  Still, the fact that my list creates so much room for women (and non-whites) suggests it reflects the universality of human experience more than what most of you came up with.

It is also notable how few of you picked entertainers or sports figures, as such individuals have figured prominently on such lists in the past (see my What Price Fame?).  In 1971 a lot of people would have said “John Lennon,” and in his day Ted Williams placed high in such surveys.  These days, for better or worse, the tech world and politics seem to exercise a stronger hold on our imaginations, all the more among MR readers I suspect.

Addendum: Here is Noah Smith’s list.

Why I don’t like desserts

I’ve been challenged on this point many times in the last few days.

People, let me stress there are two different propositions:

1. “I don’t like desserts.”

2. “I don’t like desserts (with economist’s hat on).”

I meant mainly the latter, although I do also find many desserts overrated.  If you grow accustomed to not too much sugar, many desserts in fact turn out to be disgusting.

In any case, the sugar and calories “shadow price” of most desserts is pretty high.  I’d rather consume my health sins in other ways, and so relative to their actual net prices I find few desserts are worth it.  My favorite desserts, by the way, are found in Kolkaata, and those I consume avidly.  If I lived in Kolkaata, however, I might have to convince myself they are not any good, because I see a lumpiness issue with their negative health effects. I don’t feel my tourist consumption will harm me much if at all, but as a native I would be tempted to have them every day.

The green pepper is a food which as a human I like a small amount but as an economist I like a great deal.

Who are the individuals you admire the most?

Yesterday a few of you asked me to run this poll.  Please leave your answers in the comments, I will report back.  I thank you all in advance for the wisdom of your responses.  And please restrict your answers to living people, or say anyone who has passed away in the last five years, so this should be about contemporaries, not Joan of Arc or Einstein.

Facts about music

Between 2008 and September 2012, there were 66 No. 1 songs, almost half of which were performed by only six artists (Katy Perry, Rihanna, Flo Rida, The Black Eyed Peas, Adele, and Lady Gaga); in 2011, Adele’s debut album sold more than 70 percent of all classical albums combined, and more than 60 percent of all jazz albums.

That is from William Giraldi, who is reviewing Scott Timberg’s Culture Crash: The Killing of the Creative Class, an interesting book which I hope to cover more soon.

The pointer here is from Torsten Kehler.