Canadian (signaling) markets in everything

by  Tyler Cowen in

Telegrams Canada will write your telegram for you—or at least suggest gram language for appropriate occasions. The “Get Well” suggestions include “The office/this place is just not the same without you,” and “Your many friends here are hoping for your quick recovery.”

The service isn’t cheap. A same business day telegram costs CAN$19.95 plus 99¢ per word. “Quebec usually next business day,” the company advises. “Rural routes and post office boxes may take longer.”

Here is more, a fascinating story about supposedly dead media forms which remain in existence.  Via The Browser.

Mood management of customers

by  Tyler Cowen in

Apple employees are banned from saying “unfortunately” when delivering bad news to a customer, urged instead to replace it with the more positive “as it turns out.” And management apparently takes the ban seriously: One former Apple employee tells us that his coworker was put under a 90-day probationary period because he said “unfortunately” too much at the Genius Bar.

As it turns out, “unfortunately” is just one of a number of “stop words” that are not supposed to pass an Apple Store employee’s lips.

Here is more.  Elsewhere, inspiration from Minnesota may motivate the median voter and help resolve the state’s fiscal disputes:

The Star Tribune of Minneapolis reported Wednesday that bars, restaurants and stores across the state are unable to replenish their liquor and beer supplies because they can’t renew $20 state-issued alcohol purchasing cards.

As it turns out, Minnesota cigarette markets will go away by Labor Day as well.  Unfortunately, it is hard to think of a comparable commitment device for the federal debt-ceiling logjam.

Harold Innis, an underappreciated economist, on commodity-driven growth

by  Tyler Cowen in

This Canadian economist (1894-1952) deserves an installment in the “underappreciated economists” series.  In addition to his seminal work on the economics of media and communications (better and earlier than McLuhan), he has some excellent pieces on the fur trade in Canadian economic history, and they are more contemporary than at first meets the eye.  Innis’s editor, Daniel Drache, sums up the main point:

Innis could not stress strongly enough that internal markets respond to a different logic and set of needs than externally based systems of exchange.  This occurs because the international price mechanism is volatile and subject to violence and instability in income fluctuation.

Most of all, Innis is worried about commodity and resource-based growth.  Five or ten years from now, will Canadians, Australians, and Brazilians be talking about Harold Innis as we do Hyman Minsky?

Innis also argued that the importance of the fur trade gave Canada a somewhat more peaceful history with its Native Americans than we had in the United States.  Here is a very good Wikipedia entry on Innis, who is still worth reading.

Do supermarkets improve our diets?

by  Tyler Cowen

Maybe not:

Better access to supermarkets — long touted as a way to curb obesity in low-income neighborhoods — doesn’t improve people’s diets, according to new research. The study, which tracked thousands of people in several large cities for 15 years, found that people didn’t eat more fruits and vegetables when they had supermarkets available in their neighborhoods.

Instead, income — and proximity to fast food restaurants — were the strongest factors in food choice.

The original piece (gated) is here.

Very good sentences thwarted markets in everything

by  Tyler Cowen in

“Such exorbitant commercialism must stop,” said Jan Tönjes, chief editor of Germany’s St. Georg magazine. At a recent show in Wiesbaden, he said, a woman tried to buy a rubber glove that the horse had spat on as a souvenir.

The article is here (interesting throughout) and for a related pointer (not to this passage) I thank Michelle Dawson.

From the comments

by  Tyler Cowen

Wiki writes:

One way to think about it is how much even relatively wealth Americans (those who travel abroad) willingly pay for expensive internet access while traveling. The answer is: Not very much. Look at how many people put up with less internet than they’re used to or go out of their way to find a cafe with free wifi when hotel charges are on the order of $10 or $15 per hour. But since it often takes search plus travel time (say 15-30 mins) to get to these inconvenient locations that tells me it’s REALLY not worth more than a few hundred dollars a month for most people to have internet for several hours a day in the most convenient locations. And think of all the people who can’t afford to travel or who don’t bother to get smart phones or who pay for neither texting nor email.

The infovores are overvaluing themselves and the relative weight of their consumer surplus in the economy. Certainly compared to those who were heavy users of air travel (in for example the 1960s) or those who first encountered modern highways (1930s to 50s) or who benefited from mail order catalogs and phone books. And certainly compared to users of penicillin.

Consumer surplus from the internet, revisited

by  Tyler Cowen in

David Henderson raised this question again, as has Bryan Caplan in the past.  Both seem to suggest that the consumer surplus from the internet is quite high or perhaps even “huge,” although I am not sure what number they have in mind.  I am disappointed that they are not engaging with the academic literature on this topic.

1. An 86-page 2010 FCC study concludes that “a representative household would be willing to pay about $59 per month for a less reliable Internet service with fast speed (“Basic”), about $85 for a reliable Internet service with fast speed and the priority feature (“Premium”), and about $98 for a reliable Internet service with fast speed plus all other activities (“Premium Plus”). An improvement to very fast speed adds about $3 per month to these estimates.”

2. A study from Japan found that: “The estimated WTP for availability of e-mail and web browsing delivered over personal computers are 2,709 Yen and 2,914 Yen, on a monthly basis, respectively, while average broadband access service costs approximately 4,000 Yen in Japan.”  By the way, right now the exchange rate is about 80 Yen to a dollar.

3. The Austan Goolsbee paper, based on 2005 data, does a time study to find that the consumer surplus of the internet is about two percent of  income.

4. This paper finds a four percent consumer surplus from the personal computer more generally, not just the internet.

5. Robin Hanson serves up an excellent debunking of some exaggerated consumer surplus claims.

6. Many of the benefits of internet cruising are captured in gdp figures, such as using it to find a job or the money you spend on smart phones.  By the way, here is a good paper on consumer surplus in the book market, though it offers no overall CS estimate from the internet.

You can take issue with these papers for ignoring personal internet use at work, the inframarginal benefits to infovores, or other issues, such as whether the existence of the internet increases workloads in what are supposedly leisure hours.  But there is the place to start and the numbers are not outrageously high, not close to it.

Or put all that aside and think through the problem intuitively, in terms of time use decisions.  Your marginal hour of non-internet leisure time is worth more than spending another hour of time on the internet.  In other words, at the margin your consumer surplus from the internet is about the same as your consumer surplus from going to the movies or taking a walk.  That’s nice, but suddenly the consumer surplus from the internet doesn’t seem like such a big deal any more.  It’s probably not going to add up to millions.  If the internet were as awesome for consumer fun as some people claim, it would have pushed out more of our other uses of leisure time.

What about the inframarginal units of internet use?  Might the consumer surplus there be huge?  If you think of books, movies, newspapers, and CDs as some of the relatively close substitutes for some uses of the internet, we know from cultural economics that the demand curves for those enjoyments are usually smooth, normal, and continuous, more or less.  They don’t have enormous, hidden inframarginal benefits.

Penicillin probably does have such an enormous inframarginal benefit; the initial doses can be of great value but past some margin the value falls to zero or negative.  The internet doesn’t seem to be like penicillin.

You can even make an argument that the inframarginal valuations of internet use are especially low, relative to the marginal values.  Have you ever heard that the internet is “addictive”?  That doing some makes you want to do more?  That the internet has a virtually unending supply of interesting content?  Personally I find that I could read more working papers, without much decline in their interestingness, except that the exigencies of my daily life interfere (at some margin).  Those are all signs that the marginal valuation of the internet does not fall off so drastically as one moves down the demand curve.  If you’re not using the internet more, it’s not because the internet is getting much worse with additional use units, it’s because it is digging into increasingly important parts of your non-internet life.  That brings us back to the inframarginal unit having a value not so far away from the marginal units.

It is likely that the consumer surplus of the internet is in the range of two to four percent of gdp.  On one hand, that’s “a lot” but on the other hand it’s not enough to close the “stagnation gap” in wages since 1973.  It’s not close.  It also may be quite small compared to the consumer surplus from the major innovations from earlier in the 20th century, such as antibiotics, without which I probably would be dead.

Simple numbers about Italy

by  Tyler Cowen in

European banks have total claims and potential exposures of €998.7 billion to Italy, more than six times the 162.4 billion euro exposure they have to Greece, according to Barclays Capital. European banks have €774 billion of exposure to Spain and €534 billion of exposure to Ireland.

In the United States, banks are also more exposed to Italy than to any other euro zone country, to the tune of €269 billion, according to Barclays. American banks’ next biggest exposure is to Spain, with total claims estimated at €179 billion.

But at the end of the day, “if Italy goes, it’s no longer a domino,” said Mr. Gros, the analyst in Brussels. “It’s a brick.”

The link is here.

The culture that is Sweden

by  Tyler Cowen in

Sweden’s The Local reports: A Swedish heavy metal fan has had his musical preferences officially classified as a disability. The results of a psychological analysis mean that the metal lover can now count on having his income supplemented by state benefits.

Roger Tullgren …Photo#3, Photo#4, Photo#5), 42, from Hässleholm in southern Sweden, has just got a new job as a dishwasher at a local restaurant.

Because heavy metal dominates so many aspects of his life, the Employment Service has agreed to pay part of Tullgren‘s salary. His new boss meanwhile has given him a special dispensation to play loud music at work.

“The fact that I am so into music has affected my work situation to the extent that I have had to quit some jobs,” he said.

Here is the link and for the pointer I thank Marcela V.