Wal-Mart’s price muscle: cause for worry?

by  Tyler Cowen in

The highly-intelligent-but-requiring-a-good-dose-of-Don-Boudreaux Ezra Klein writes:

My guess is that Wal-Mart’s size and might is having much more profound effects on our economy through the demands and strains it places on suppliers than through their lowish wages and benefits for direct employees (although those labor standards give them a competitive advantage over chains with higher standards, and so we race to the bottom…).  So much as I want the latter to go up and unionization to rush across the land, I’m more worried that Wal-Mart’s size and status as the indispensable outlet for products, when coupled with their virtually maniacal (though fully understandable) demands for lower pricing, are pushing down wages and work conditions all throughout [sic] the land and, for that matter, the world.  Suppliers simply can’t pay better and push the marginal cost to consumers — Wal-Mart will drop them faster than you can say "Always low prices."

If our economy had more pockets of sluggish monopoly power, those highly stable and visible firms might be more unionized.  But unionization is not desirable per se.  Keep in mind, a well-functioning antitrust law raises real wages rather than lowering them.  Wal-Mart, by squeezing suppliers and lowering prices, does the same.  Wal-Mart suppliers are still selling at "price above the appropriate measure of marginal cost," albeit by less than before.  Asking for higher prices and higher monopoly profits — not as a spur to innovation, but in the hope that monopolizing suppliers will share those profits with their laborers — is a bad way to elevate the American standard of living.

I worry more when Wal-Mart acts to keep prices up. 

Prudie’s corn cob

by  Tyler Cowen in

Here is the query:

I have fallen in love with a woman I knew from childhood and ran into
again after not seeing her for 20 years.  As kids we hardly noticed each
other, but when we met again after all these years we felt an immediate
[sic] attraction.  The problem is that when I was 12 years old I did something
terrible that caused an accident that killed her father.  No one ever
found out it was me and I’ve never told anyone after all these years.  I
feel horrible about what happened, but it was a long time ago and I’ve
gotten on with my life.  But now what?  Should I tell this woman that I
caused her father’s death many years ago?  I’m afraid it would ruin our
relationship and we love each other a great deal.  The accident occurred
when I was in a cornfield at night—we were throwing corn at cars when
they drove by.  We couldn’t see the cars because we were hidden in the
field.  An ear of corn I threw went through the open car window and
struck her father in the head, causing him to lose control of the car
and crash into a tree.  I ran from the scene and was never implicated.

Prudie thinks this is a tough moral dilemma, but that the guy has to come clean for his self-respect ("You cannot build a healthy relationship on such deceit"), admitting that her lawyers give the opposite advice. 

Trudie starts from a different framework, namely that falling ln love is not entirely a spontaneous event.  It is planned by our subconscious more than we realize.  What could prevent us from falling in love with someone?  Trudie could not, for instance, fall in love with a woman Trudie knew to be a communist, even if, like the younger Yoko Ono, she were extremely smart, attractive, and loved atonal music.  Trudie also could not fall in love with a woman whose father he had killed, however "accidental" the event (what *was* he aiming the corn cob at, at what angle did it enter the window, and did he glue a rock to it?)

The simplest hypothesis, based on the near-universality of self-deception, is the following: a) the guy is a murderer, and b) he loves having the power over this girl that follows from having murdered her father and then holding this secret from her.  He feels he can reduce her to a quivering mass of jelly anytime by coming forward with the information.  He loves having that power so much that first he falls in love with her (who has he been dating in the meantime?) and then he writes into an advice columnist so as to report that power to other people, even at the risk of legally incriminating himself.  Sick, sick, sick.

If that scenario is true, if only with some positive probability, what advice should Prudie give the guy?  And under what conditions can you fall in love?  Can you trust your conscious self-reporting of what you are doing any more than the murderer who wrote  Prudie?

If only Tim Harford were here to set us straight…

I didn’t believe it at first

by  Tyler Cowen in

…we conjecture that binge drinking conveys unobserved social skills that are rewarded by employers.

Here is the full and very carefully done paper.  I’ve known for a while there is a correlation between drinking and wages, but only recently have I started thinking it might be more than a trick in the data.  The effect disappears for women, once educational attainment is taken into account.  So should you encourage your sons to drink, so as to learn rituals of social bonding, or is their binging simply a signal of sociability?  I’ll note, by the way, that I am a not very social person who also doesn’t drink much, verging on not at all.

Addendum: Andrew Gelman has much more to say on the topic.

New Jersey fact of the day

by  Tyler Cowen in

Life expectancy for an Asian female living in Bergen County, New Jersey: 91 years.

Here is the source, via Jason Kottke.  Yes, lifestyle and attitude matter.  This is one indication that the American health care system isn’t as bad as it is sometimes made out to be.

Addendum: From a different direction, here is Levitt and Dubner on paying doctors to wash their hands.

As of tomorrow, Shostakovich was born 100 years ago

by  Tyler Cowen in

The symphonies are tricky, because many of them are wonderful
live but meandering on disc.  On disc you should favor 5, 10, 14, and
15.  #4 is a breakthrough work but no longer so important.  #6-8 are
amazing in concert, with a good conductor, but otherwise a struggle.  9 is pleasant but
slight.  #11-13 are a mixed bag, worth knowing, but don’t judge him by
those or start there.  For #5 buy Bernstein, for ten buy Mitropoulous or
Mravinsky (though many versions are excellent), for #15 Jarvi or Haitink are good versions.  The closing bit of #10 is perhaps my favorite
moment in all of Shostakovich.

The String Quartets are his most convincing and most consistent works.  The Brodsky, Borodin, and Manhattan Quartets all do good versions.   

Buy the two-disc set of his Preludes and Fugues, Opus 87.  Ashkenazy is the version of choice, though I retain a fondness for the idiosyncratic jazzy take of Keith Jarrett.  This is the Shostakovich you will enjoy if the sometimes harsh textures of the orchestral works put you off.

Also buy the Op. 67 Trio for Piano, Cello, and Violin, performed by Yo-Yo Ma, Isaac Stern, and Emanuel Ax.

That’s it.

I’ve never been convinced by the opera, the film music, the concerti, the rest of the piano music, or the short jazzy pieces, though all have their defenders.

Here is some summary information.

The phantom Tyler Cowen

by  Tyler Cowen in

Here is a rough paraphrase of my words yesterday to one of my doctoral students:

"It is not I, Tyler Cowen, your doctoral advisor, who will give you the most aid on this dissertation.  It is the Phantom Tyler Cowen inside your head.  You have a model of me, a pretty good one, and you know what I will object to and what will delight me.  The Phantom Tyler Cowen objects, in your head, before the real Tyler Cowen has much of a chance.

That is why the real Tyler Cowen is sometimes so silent."

The Conquest of Nature

by  Tyler Cowen in

I had not realized how man-made and engineered the Rhine was, and how early this occurred:

This was the largest civil engineering project that had ever been undertaken in Germany.  The Rhine between Basel and Worms was shortened from 220 to 170 miles, almost a quarter of its length.  Dozens of cuts were made, more than twenty-two hundred islands removed.  Along the stretch between Basel and Strasbourg alone, well over a billion square yards of island or peninsula were excavated and 160 miles of main dikes constructed containing 6.5 million cubic yards of material.  During the 1860s the number of fascines being used was running at up to 800,000 a year.

That is from David Blackburn’s The Conquest of Nature: Water, Landscape, and the Making of Modern Germany.  This history of water engineering is not a book for all of you, but if you think you might like it, you will.

Addendum: Elsewhere on the new book front, Niall Ferguson is a splendid author, but his new The War of the World doesn’t add much.

Torture and neuroeconomics

by  Tyler Cowen in

Studying some neuroeconomics has made me even more opposed to torture than I was in the first place.  Yes I will make an exception for the ticking nuclear time bomb.  But if we are torturing a very very bad person, I don’t see the torture as satisfying justice.  The part of the brain which suffers is not the same as the part of the brain which planned the crime.  Yes neuroeconomic data are hard to interpret.  But under one view, there is a sheer production of pain which is severed, to some extent, from the individual personality of the criminal.  It is almost as if we are creating a new suffering entity which consists of little more than pure suffering.

I don’t think this is the most important argument against torture, but it is one additional consideration.  Retributive justice does not weigh on the pro-torture side of the scale as much as one might think.

Matt Yglesias surveys what the recent "torture compromise" really means.

Making school choice work

by  Tyler Cowen in

Here is a new policy paper by Caroline Hoxby, written for a New Zealand context.  It is an admirable brief summary of the U.S. evidence on school choice, almost like a response to Ezra Klein.  Here is a summary.  Her conclusions are that successful school choice requires:

  • Supply flexibility, which means that schools should have the ability to open where there is demand for them, expand with increased demand and contract with reduced demand
  • Money should follow students, which means that funding policies must be designed so that schools that are in demand have the funds to expand and those that are not in demand lose funds and must contract; and
  • Independent management of schools, which means that schools must be free to innovate in a range of areas, including pedagogy, teacher pay, budget allocation, and the way the school is organised.

Hoxby stresses that these conditions are rarely found together.  By the way, the paper does not cover either Chilean or Colombian experience with vouchers.

What do on-line daters want?

by  Tyler Cowen in

Like this:

Outcomes are strongly increasing in measured looks.  In fact, the looks ratings variable has the strongest impact on outcomes among all variables used in the Poisson regression analysis.  Men and women in the lowest decile receive only about half as many e-mails as members whose rating is in the fourth decile, while the users in the top decile are contacted about twice as often.  Overall, the relationship between outcomes and looks is similar for men and women.  However, there is a surprising “superstar effect” for men.  Men in the top five percent of ratings receive almost twice as many first contacts as the next five percent; for women, on the other hand, the analogous difference in outcomes is much smaller.

Or this:

Height matters for both men and women, but mostly in opposite directions. Women like tall men (Figure 5.4).  Men in the 6’3 – 6’4 range, for example, receive 65% more first-contact e-mails than men in the 5’7 – 5’8 range.  In contrast, the ideal height for women is in the 5’3 – 5’8 range, while taller women experience increasingly worse outcomes.  For example, the average 6’3 tall woman receives 42% fewer e-mails than a woman who is 5’5.  We examine the impact of a user’s weight on his or her outcomes by means of the body mass index (BMI), which is a height-adjusted measure of weight.  Figure 5.5 shows that for both men and women there is an “ideal” BMI at which success peaks, but the level of the ideal BMI differs strongly across genders.  The optimal BMI for men is about 27.  According to the American Heart Association, a man with such a BMI is slightly overweight.  For women, on the other hand, the optimal BMI is about 17, which is considered under-weight and corresponds to the figure of a supermodel.  A woman with such a BMI receives 90% more first-contact e-mails than a woman with a BMI of 25.  Finally, regarding hair color (using brown hair as the baseline), we find that men with red hair suffer a moderate outcome penalty.  Blonde women have a slight improvement in their outcomes, while women with gray or “salt and pepper” hair suffer a sizable penalty.  Men with long curly hair receive 18% fewer first-contact e-mails than men in the baseline category, “medium straight hair.”  For women, “long straight hair” leads to a slight improvement in outcomes, while short hair styles are associated with a moderate decrease in outcomes.

pp.21-22 tell us about income and education.  And this:

38% of all women, but only 18% of men say that they prefer to meet someone of their own ethnic background.

African-American and Hispanic men get only half as many first-contact emails from white women as do white men; Asian men get only about one-quarter as many.

Freakonomics 2.0

by  Tyler Cowen in

1. Dubner describes the forthcoming revised edition of the book.

2. Commentary on the recent and apparently pro-market Swedish elections.

3. The World Chess championship match starts Saturday in Kalmykia, Europe’s only Buddhist republic.  Here is one very good analysis of the players.

4. Hal Varian on the county-specific theory of American income inequality; the high-tech boom seems to play a big role.

What features would you like to see in future supermarkets?

by  Tyler Cowen in

So asks The New York Times (TimesSelect).  Randall Williams responds:

I like to try interesting recipes which often have exotic ingredients.  But I often don’t need a whole bottle or bunch of a spice or other ingredient that I might never use again.  It would be great to have an “assembly area” similar to the deli section where I could take my recipe and get a tablespoon of this and an ounce of that, measured into little plastic cups that I could take home to cook with.

The excess bundling is a form of price discrimination.  If you can’t be bothered to go to an ethnic market, which is both cheaper and sells in more flexible quantities, they figure you will pay the higher price.

As for me, I used to wish for shorter check-out lines, but now usually I get them.  Dark chocolate is there too.  I still would like ready-to-buy, truly fresh cooking stocks (beef and chicken), better magazines, and home delivery. 

We should expect supermarkets to overinvest in encouraging impulse purchases.  (Wegman’s should put a given item in only one place and yes I will learn where that is.)  Maybe that is the economic problem with home delivery.  Smells, squeezes, and full-size items — not Internet links — sell profitable foodstuffs.  The boring bulk stuff which is easy to order over the Internet also brings the lowest profit margins, I believe.

Here is a (non-gated) article on how supermarkets are evolving.

What do you wish for, and what is the analysis behind your wish?