Category: Uncategorized

Why is there dynamic surge pricing *for rides*?

by  Tyler Cowen in

“Surge Pricing Solves the Wild Goose Chase” is the title of the new paper by Juan Camillo Castillo and E. Glen Weyl, here is the abstract:

Why is dynamic pricing more prevalent in ride-hailing apps than movies and restaurants? Arnott (1996) observed that an over-burdened taxi dispatch system may be forced to send cars on a wild goose chase to pick up distant customers when few taxis are free. These chases occupy taxis and reduce earnings, effectively removing cars from the road and exacerbating the problem. While Arnott dismissed this outcome as a Pareto-dominated equilibrium, we show that when prices are too low relative to demand it is the unique equilibrium of a system that uses a first-dispatch protocol (as many ride-hailing services have committed to). This effect dominates more traditional price theoretic considerations and implies that welfare and profits fall dramatically as price falls below a certain threshold and then decline only gradually move in price above this point. A platform forced to charge uniform prices over time will therefore have to set very high prices to avoid catastrophic chases. Dynamic “surge pricing” can avoid these high prices while maintaining system functioning when demand is high. We show that pooling can complicate and exacerbate these problems.

Perhaps it is an analogy to suggest movie theaters might use more surge pricing if a low valuation buyer took up the seat for several showings of the movie rather than just one.

What to watch for in 2017

by  Tyler Cowen in

1. Iran’s presidential race in May.  Iran does run real elections — sort of — but will Rouhani survive?  Or will the hardliners ascend again?  How much is Rouhani a hardliner anyway?  Stay tuned.  I’ll just note a theorem in the margins here: the greater the unpredictability of the American president, the more the identities and decisions of the other world leaders matter.  According to Wikipedia, the only announced reformist candidate is a blogger (not a good sign for him or them).

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2. How Nigeria copes with its recession.  This is the one country in sub-Saharan Africa that has the size and talent to make a significant commercial breakthrough.  Now that oil prices are back up a bit, can they dismantle their counterproductive exchange and capital controls, boost FDI, and get to four to six percent growth?  Or will they wallow in the range of one to two percent, which hardly means anything in light of Nigeria’s rising population?

3. Whether the Democratic Republic of the Congo remains stable. Joseph Kabila is staying past the end of his second presidential term.  Will this lead to renewed instability and conflict, beyond what is already the case?  “Africa’s World War” ended in 2003, not long ago, and it is not impossible to imagine it resuming.

4. African fertility rates.  They’re high.  In most other parts of the world, including Latin America and the Middle East, fertility has fallen much faster than most commentators had expected.  That is not yet the case for Africa, but will it be?

5. Modi’s India and where it it headed: Maybe the demonetisation was an unforced error, but it seems increasingly likely it was part of a broader strategy to push India into a semi-cashless, biometrically marked, income tax-paying society.  I’ll be curious to see how that goes.

6. Economic growth in Pakistan and Bangladesh.  Pakistan grew 4.7 percent last year and Bangladesh has averaged about six percent for the last decade.  Is all that (relative) good news going to continue?  If so, the world will be in much better shape than otherwise.

7. Will Xi Jinping overturn Chinese political conventions?  His term is supposed to end in 2022, but for a while he has been sending signals he might try to stay on as leader for much longer.  That could bring a new round of political instability to the Middle Kingdom.  Or a new round of stability.  Depending how you look at it.

8. Chinese capital flight and the currency peg.  This one seems to be heating to a boil.  Capital flight continues to rise, using every technique known to mankind including Bitcoin and e-purchases of Singaporean gambling tokens.  The government says that the sporadic reports of USD trades at 7-1 are nonsense, so they must be right.  When will it snap?  And when it does, will it be a non-event or a big deal?

9. American institutions: Will the United States Congress and courts continue to secure some version of rule of law in this country?  And will we agree on what that means?

10. What is the Latin American middle class good for?  Many Latin economies now have built a reasonably-sized middle class, but commodity prices are not in general favoring those economies.  Will those middle classes push their countries into better policies and educational systems?  Slowly but surely, I believe the answer is yes.

There is a chance the French or German elections make this list, but right now the best forecasts are for “business as usual” in both cases.  Brexit will continue to torture us with its drawn-out agony.  And remember — your emotional guide as to what is an important issue often reflects your own selfish concerns about the status of you and your preferred groups.  Do keep that in mind throughout this year.

If you’re looking for a few sleeper issues, I’ll cite Russia-Israel tensions over control of Middle Eastern airspace, economic and institutional recovery in Ukraine combined with sabotage potential from you-know-where, the political economy and geopolitics of aging in Japan, the rise of a Trump-like populist in Mexico, and the potential failure of the Saudi reform process as a few more to keep your eye on.  Climate change and the destroyed parts of the Middle East bear watching too, along with ongoing collapse in Yemen, for water supplies too.

In which I try to explain the logic of discontent

by  Tyler Cowen in

Or at least part of it:

Consistent with those points, I would say the road widening is wonderful for boosting throughput — that is, it gets more people and cars onto the road. Yet it’s mediocre or worse for improving the quality of life of the typical resident. An economist, engineer or technocrat typically believes that boosting throughput is important, but voters usually are less impressed.

Western democracies are encountering more problems that have this logical structure and bring an analogous clash of values…

It’s no accident that so many of the gains available today involve throughput. If you widen a road, more people will drive on it. If you open up a border, more foreigners will come. If you build more in a well-to-do city, new residents will pour in and make it more crowded. These days there is always someone knocking at the gates because of all of the global talent that has been mobilized.

And that is part of the logic that elected Donald Trump and drove Britons to vote to leave the European Union. It’s well known in economics that when prices and opportunities change, it is the elastic factors of production (those that can change their plans readily) that gain the most, and the inelastic factors that are most likely to bear losses. Insiders and long-term residents are so often the inelastic ones while outsiders and newcomers have the greater willingness or ability to adjust.

That is from my Bloomberg column, there is much more at the link.

My favorite things Nigeria

by  Tyler Cowen in

Yup, I’m here.  I made this list before setting off:

1. Popular music: Few from any country come close to Fela Kuti, the main question is how many you should buy, not which ones.  Most of them!  On the CD medium, that old series of “two albums on one CD” was the best way to consume Fela.  On streaming, you can probably just let it rip.  And rip.  And rip.  Other favorites are King Sunny Ade and I.K. Dairo, I don’t love Fema Kuti.  You also might try Nigerian psychedelic funk rock from the late 60s and early 70s, for instance found here.  Most of all, there are thousands of wonderful local performers in Nigeria, you can watch a few of them on the Netflix documentary on the Nigerian music scene, titled Konkombe, recommended and only an hour long.

There is now a good deal of hit Nigerian and Nigerian-American music, such as Wizkid.  It is enjoyable but does not compare to Fela in terms of staying power.

2. Basketball player: The Dream is one of my three or four favorite players of all time.  My favorite Hakeem was watching him pick apart David Robinson play after play after play…see the final clip on the immediately preceding link.

3. Novel: Chinua Achebe, Things Fall Apart.  Honorable mentions go to Wole Soyinka, Ben Okri, and my colleague Helon Habila.  There are also the Nigerian-American writers, such as Chimamanda Ngozi Adichie.  Teju Cole is worth reading, including his non-fiction.

4. Movie: Well, I’ve seen parts of some of them, and you should at least sample some Nollywood if you haven’t already.  It’s kinetic.  The documentary “Nollywood Babylon” (Netflix) gives you some background.  As for “Movie, set in,” I draw a blank.  “Album, set in and recorded in” would be Band on the Run, Paul McCartney and Wings.

5. Actor: Chiwetal Ejiofor, he starred in “Twelve Years a Slave,” and is from a Nigerian family in Britain.

6. Presidential name: Goodluck Jonathan.

7. Artist: Prince Twins Seven Seven, or more formally Prince Taiwo Olaniyi Wyewale-Toyeje Oyekale Osuntoki.  He received his nickname because he was the only surviving child from seven distinct sets of twins.

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8. Food dish: At least for now I have to say jollof rice, a precursor dish to jambalaya, further reports to come however!

The bottom line: Lots of talent here, plenty more on the way.

Tuesday assorted links

by  Tyler Cowen

1. “I’m not going to stop traveling because a fly bit me.”

2. “She also admitted that she never asks what customers do with the tests, and doesn’t see how any woman could really ‘trap a man’.”

3. Is winter ice thickening a feasible option for the Arctic?

4. Heavy drinking has been normalized for American women.

5. The percentage of economics majors who are female has not gone up since 1986.

Top MR Posts of 2016

by  Alex Tabarrok

Marginal Revolution University grew tremendously in 2016 and I’m thrilled with our Principles of Macroeconomics course and excited about all the new videos that we will release in 2017–including videos from India where I will be working on sabbatical. It was a good year for me personally and professionally. But 2016 was a very bad year for the world and this was reflected by the posts on Marginal Revolution.

The number one post of the year said it all: What the hell is going on? As Tyler put it in that post, “Donald Trump may get the nuclear suitcase, a cranky “park bench” socialist took Hillary Clinton to the wire, many countries are becoming less free, and the neo-Nazi party came very close to assuming power in Austria.”

Looking back now, it is clear that Tyler foresaw where the world was going and he starting working hard to understand the trend long before others were forced to retrospect. All of the following posts were in the top 20:

The second highest viewed post was actually my post, Economist Removed From Plane for Algebra, which was rather clickbaity although at least it wasn’t a hoax. I had two other top-ten posts, both of which were substantive. First was India’s Demonetization–What is Next? which pointed to all the right issues on this still evolving monetary shock. A number of Indian bloggers and writers picked up on this post. Also in the top ten was the surprising, Homicide Data by Weapon.

My posts on housing, Collective Property in Palo Alto, Laissez-faire in Tokyo Land Use, and the Japanese Zoning System were all widely read. As was Economics on Buying versus Renting a House which led to Tyler and me debating the issue for Econ Duel.

Other widely read posts of mine were:

I have saved, however, the best to last. Coming in at number 50 was a strange, shocking, only Tyler could have written, post. At the time not enough people took it seriously but it bears repeated and careful reading:

Does Lucifer in fact inhabit the corpus of Hillary Clinton?

Yes, 2016 was that kind of year.

What I’ve been reading

by  Tyler Cowen in

1. Charles Wohlforth and Amanda R. Hendrix, Beyond Earth; Our Path to a New Home in the Planets.  The core claim is that humans can (will?) colonize Titan, the moon of Saturn.  But what are we to make of sentences such as: “The temperature is around -180 Celsius (-290 Fahrenheit), but clothing with thick insulation or heating elements would keep you comfortable.  A rip wouldn’t kill you as long as you didn’t freeze.”  Pregnancy would be tricky too.

2. Ian Thomson, Primo Levi.  One of my favorite literary biographies, ever.  This is also a first-rate look at the history of the Holocaust, and the postwar Italian literary world.  Definitely recommended.

3. Philippe Girard, Toussaint Louverture.  One of the best and most readable treatments of the Haitian revolution, with a focus on Louverture of course.  Here is one good bit:

When it came time to pick between two extremes — slavery and unfettered freedom — Louverture stopped well short of the latter.  By order of General Louverture, all former field slaves, even those who had settled in urban areas during the Revolution, would return to their original plantations, sometimes under their former masters.  Those who refused would be “arrested and punished as severely as soldiers,” which implied that plantation runaways could be shot as deserters.  He thereby merged the two worlds he knew best — the sugar plantation and the army camp — into a kind of military-agricultural complex.

According to many critics at the time, rebel leaders were in essence confiscating the slave plantations of their former white masters.  Furthermore, the importation of laborers from Africa was to continue.

4. Lewis Glinert, The Story of Hebrew, delivers exactly what it promises: “For many young Israelis, Arial is virtually the only font they read.”

Also in various stages of undress are:

Jeffrey D. Sachs, Building the New American Economy: Smart, Fair, and Sustainable, foreword by Bernie Sanders.

Niall Kishtainy, A Little History of Economics, a modern-day Heilbroner.

Johan Norberg, Progress: Ten Reasons to Look Forward to the Future, a Julian Simon-esque take on the case for optimism.

Why I don’t enjoy the Rolling Stones anymore

by  Tyler Cowen in

If I were to make a list of the top groups/performers during the critical 1964-1973 period, no doubt the Stones would make the top five handily, perhaps the top three.  They also belong to that select tier with more than six excellent and important albums.  They probably have created more great and memorable riffs than any other rock and roll group, ever.

So I don’t think I am unappreciative.  My favorite cuts are probably the acoustic country songs on “Beggars Banquet’ and “Let It Bleed,” plus the riff-based songs from the mid- to late-1960s, such as “Under My Thumb” or “19th Nervous Breakdown.”

Still, I have not heard anything new in a Rolling Stones song for more than twenty years.  I don’t mean that their later work is worse (though it is, much, for forty plus years running), rather I don’t hear anything new in their very best work and thus repeated re-listening is a waste of time.  I don’t enjoy it.

In contrast, I’ve been listening to Jimi Hendrix for about forty years and still hear new bits in his songs most of the time.  I am almost always excited to hear this work again.

I have two other objections.  First, most (all?) of their blues covers are worse than the originals (the Beatles’ “Money” and “You Really Got a Hold On Me” and “Long Tall Sally” are all improvements, in contrast, not to mention John Lennon’s “Be Bop a Lula” or Hendrix’s “Hey Joe”).  Second, you don’t have to invoke political correctness to feel that a lot of the early misogyny has worn thin and aged poorly.

So the Stones are boring, mostly, though still excellent in the abstract.  It’s hard to imagine classic rock and roll, or the 1960s, without them.  But in terms of lasting overall aesthetic merit they are just a wee bit closer to The Who than you might like to think.

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