Results for “the tipping point” 48 found
The Chinese fapioa, or reverse tip
In China a fapioa – the official receipt used for expense claims has a resale face value of 2 – 10% of face value – leaving one behind in a restaurant or taxi is the equivalent of giving a tip (in a culture where tipping is uncommon) and not requesting one allows the person or establishment to avoid ringing the exchange through a cash register. There are two primary practices around handing out fapioa: the first is that they are printed to the exact value; the second is that the seller takes an equivalent sum from book of fapioa that contains various denominations.
In many smaller establishments the seller is reluctant to hand over fapioa since in essence it becomes declared income and it is common to have to ask twice, especially as a foreigner. But in larger service industry chains where (some) tax is a given and employees feel less loyalty to the bottom line over-paying on fapioa (handing back receipts way in excess of the actual sums purchased) is like handing money back to the customer. The social norms dictate that the seller should round up – so if the the lowest denominations are 20 RMB (about 2.5 Euro) a customer could get 40 RMB of fapioa for a 25 RMB drink.
Here is the link, and for the pointer I thank Fred Smalkin.
What would a sovereign debt crisis look like in the United States?
There is a new Econ Journal Watch symposium on this topic, with contributions from Arnold Kling, Garett Jones, Peter Wallison, Joseph Minarik, and Jeffrey Rogers Hummel, recommended. I am myself closest to the views of Garett Jones. Here is a related video.
Whole Earth Discipline
Here's my final quote (earlier quotes here and here) from Stuart Brand's Whole Earth Discipline: An Ecopragmatist Manifesto, a quote which sums up the thesis of the book:
Accustomed to saving natural systems from civilization, Greens now have the unfamiliar task of saving civilization from a natural system…
Brand is talking about climate change and in particular the possibility of rapid, difficult to reverse, tipping points in climate. Brand has a challenging message for environmentalists: If we take the threat of climate change seriously we must recognize that Cities are Green, Nukes are Green and Genetic Engineering is Green.
Brand's long history with the environmental movement should give his message credibility with that group. Brand's rationalism, reasonableness, and pro-technology, pro-civilization outlook gave his environmental message credibility with me.
Assorted links
1. Testing the Schelling tipping point segregation model, done by Bill Easterly.
2. Markets in everything: Ms.Taken, false engagement rings.
3. More on Zeke Emanuel, from TNR.
4. New developments on the origin of life on earth.
5. The Kennedy plan, as seen by the CBO.
What is New Trade Theory?
Congratulations to Paul Krugman on his Nobel. Here is a primer on one of Krugman’s key contributions, New Trade Theory. Tyler has more links below.
Ricardo showed that every country (and every person) has a comparative advantage, a good or service that they can produce at a lower (opportunity) cost than any other country (or person). As a result, production is maximized when each country specializes in the good or service that they produce at lowest cost, that is in the good in which they have a comparative advantage. Since specialization in comparative advantage maximizes production, trade can make every country better off.
But what determines comparative advantage? In Ricardo it is the natural products of the soil, Portugal is good at producing wine and so England has a comparative advantage in cloth. Heckscher, Ohlin and Samuelson among others extended the model to show how factor proportions can determine comparative advantage – countries with a lot of labor relative to capital, for example, will tend to have a comparative advantage in labor intensive goods production.
Notice, however, that in the Ricardian model and its extensions the determinants of comparative advantage like geography and factor proportions lie outside of the model. New Trade Theory of which Paul Krugman can be said to be the founder, brings the determinants of comparative advantage into the model.
Consider the simplest model (based on Krugman 1979). In this model there are two countries. In each country, consumers have a preference for variety but there is a tradeoff between variety and cost, consumers want variety but since there are economies of scale – a firm’s unit costs fall as it produces more – more variety means higher prices. Preferences for variety push in the direction of more variety, economies of scale push in the direction of less. So suppose that without trade country 1 produces varieties A,B,C and country two produces varieties X,Y,Z. In every other respect the countries are identical so there are no traditional comparative advantage reasons for trade.
Nevertheless, if trade is possible it is welfare enhancing. With trade the scale of production can increase which reduces costs and prices. Notice, however, that something interesting happens. The number of world varieties will decrease even as the number of varieties available to each consumer increases. That is, with trade production will concentrate in say A,B,X,Y so each consumer has increased choice even as world variety declines.
Increasing variety for individuals even as world variety declines is a fundamental fact of globalization. In the context of culture, Tyler explains this very well in his book, Creative Destruction; when people in Beijing can eat at McDonald’s and people in American can eat at great Chinese restaurants the world looks increasingly similar even as each world resident experiences an increase in variety.
Thus, Krugman (1979) can be thought of as providing another reason why trade can be beneficial and a fundamental insight into globalization.
Moreover, Krugman (1979) began the task of bringing the reasons for comparative advantage within the model. In that paper, Krugman also hypothesizes briefly about what happens when we allow migration within the model. Recall, that in Heckscher-Ohlin-Samuelson factor proportions explain trade patterns but are themselves determined outside of the model. When people and capital can move, however, factor proportions are themselves something to be explained.
Krugman (1991) (JSTOR and here) brings increasing returns together with capital and labor migration and transport costs into one model. Krugman’s (1991) model has become a workhorse of economic geography and international trade. The model is too complex to explain here but the reasons for that complexity are clear to see – when everything becomes "endogenous" small initial differences can make for big effects. To minimize transport costs, for example, firms want to locate near consumers but consumers want to locate near work! Thus, there are multiple equilibria and at a tipping point the location decisions of a single firm or consumer can snowball into big effects. So Krugman has been a leader in introducing tipping points, network effects and thus the importance of history into international trade as well as into economics more generally.
Markets in everything?
Who knows, but just maybe:
Doubts about the official version of the rescue surfaced in Switzerland
where a public radio station quoted an unidentified source – "close to
the events, reliable and tested many times in recent years" – saying
$20m was paid to the guerrillas. "It was not a negotiation with the
Farc directly but with a person who is very important in that
organisation, commander César," Frederich Blassel, a journalist with
the Swiss station, told Colombian radio. The reported suggested that a
wife of one of the guards – possibly César – had acted as a go-between
after being arrested by the security forces.
It’s in any case spectacular news and a major blow against terrorism. Colombia remains an underrated economy and tourist destination and I expect this to serve as a further tipping point toward good things.
Assorted links
1. Crisis vs. recession. Via Felix Salmon, here is a wise account from India, it is still likely to be true.
2. Are tips discriminatory against African-Americans?
3. Money does make you happy — if you give it away (via Jacqueline Passey)
Why don’t American kids respect their parents more?
First, you are welcome to challenge the premise that there is in fact less respect for parents in the United States. But if it were true, what might be the possible mechanisms?
1. American parents have less time to discipline their kids, in part because women are more likely to work, wages are higher, and there is a general rush and hurry.
2. American culture is less closely tied to the entire notion of hierarchy and respect, whether or not kids are in the picture.
3. The American divorce rate is relatively high.
4. Balance is difficult, and a tipping point requires that someone be in charge. In America that is the kids, although the underlying reasons for this difference may be quite small.
5. America is saturated in mass media, and that culture encourages the independence of the child, most of all because children are prime viewers of TV and drivers of Nielsen ratings.
6. Americans are more mobile, and thus less likely to live near grandparents, support structures, and other mechanisms of norm enforcement.
7. It is simply a time trend. Americans are ahead of the rest of the world but everyone else is catching up. Give them time, it’s just like how we will all come to resemble California someday.
8. "In America it depends on how parents behave and whether particular parents deserve to be treated with respect. Parents don’t get respect automatically just because they are parents." I’m not going to tell you who said that one.
9. Some other notion of American exceptionalism.
Your views? Google appears to yield few answers to this question or even attempts at an answer…
Does Mexican immigration reduce crime?
Robert Sampson writes in today’s NYT Op-Ed page:
…evidence points to increased immigration as a major factor associated with the lower crime rate of the 1990’s (and its recent leveling off).
Hispanic Americans do better on a range of various social indicators — including propensity to violence — than one would expect given their socioeconomic disadvantages. My colleagues and I have completed a study in which we examined 8,000 Chicago residents who were asked about the characteristics of their neighborhoods.
Surprisingly, we found a significantly lower rate of violence among Mexican-Americans than among blacks and whites…Indeed, the first-generation immigrants (those born outside the United States) in our study were 45 percent less likely to commit violence than were third-generation Americans, adjusting for family and neighborhood background. [TC: But don’t absolute probabilities play the key role here? And should we compare Mexicans to "blacks and whites" or to each group in isolation?] Second-generation immigrants were 22 percent less likely to commit violence than the third generation.
Our study further showed that living in a neighborhood of concentrated immigrants is directly associated with lower violence (again, after taking into account a host of factors…)
Alas, there is no permalink these days. Here is the relevant project which generated the data. No one of Sampson’s pieces on his web page seems to cover this result, though many are relevant more broadly. Also see this summary of his criticism of "broken window" and "tipping point" theories of crime.
Here is another piece which seems to support the basic result that Mexican immigration lowers crime. Here is a survey article on the topic. This piece (see p.113) suggests that crime is lower in border cities than comparable non-border cities, and that Mexican immigration cannot be identified as a cause of a higher U.S. crime rate.
Yes comments are open, but purely anecdotal accounts of how you were once mugged by a Mexican, or how your neighborhood just isn’t "the same anymore" are discouraged. I’m posting a version of this over at Volokh Conspiracy as well, look for the differing comments.
Addendum: Read Alex on this topic.
Racist tips?
We collected data on over 1000 taxicab rides in New Haven, CT in 2001. After controlling for a host of other variables, we find two potential racial disparities in tipping: (1) African-American cab drivers were tipped approximately one-third less than white cab drivers; and (2) African-American passengers tipped approximately one-half the amount of white passengers (African-American passengers are 3.7 times more likely than white passengers to leave no tip).
Many studies have documented seller discrimination against consumers, but this study tests and finds that consumers discriminate based on the seller’s race. African-American passengers also participated in the racial discrimination. While African-American passengers generally tipped less, they also tipped black drivers approximately one-third less than they tipped white drivers.
The finding that African-American passengers tend to tip less may not be robust to including better controls for passenger social class. But it is still possible to test for the racialized inference that cab drivers (who also could not directly observe passenger income) might make. Regressions suggest that a "rational" statistical discriminator would expect African Americans to tip 56.5% less than white passengers.
I’ve read the abstract but not yet the paper. Note the authors wish to ban tipping [NB: they call it mandatory tipping] to limit racism. Thanks to Mitch Berkson for the pointer.
Is CAFTA a good idea?
Here is one lengthy criticism of the treaty. Look there for the details, but here are my views:
1. The Bush Administration has not negotiated the treay on a bipartisan basis. In part this is Bush’s core style, in part the Democrats have not offered much useful assistance. If the treaty passes, the "pork cost" to swing Republicans will be high.
2. The worst parts of the treaty limit anti-AIDS drugs by extending intellectual property rights to Central America too strictly. Yes drug companies will try to price discriminate, but the Brazilian solution may be better. What will happen to generic medicines in Costa Rica? Of course patent-breaking is a bad international precedent, but is Central America the relevant international tipping point for the destruction of intellectual property rights? The net effect is difficult to estimate, read more here.
3. On the other hand, sooner or later these stronger patent protections might be imposed anyway, as Central American nations develop and join the global mainstream. The question is how many people will die in the meantime.
4. More generally, the U.S. is setting bad precedent by using free trade treaties as leverage to negotiate other non-trade deals.
5. The treaty remains hostage to the interests of Big Sugar, as the sugar quota is barely weakened. Nonetheless the sugar lobby still opposes the treaty, fearing a slippery slope of further erosion of privilege. This is a good sign for the treaty.
6. Don’t worry that the agreement does little for labor rights or environmental protection in Central America. Imposing such policies, before the recipient countries are wealthy enough to support them, is usually counterproductive.
7. The net move toward free trade is relatively small.
8. The biggest benefit of the treaty may be symbolic, by encouraging the Central American nations to embrace democracy more strongly and also to develop closer trade relations with each other.
9. Failure of the treaty would be a disaster, again for symbolic reasons. Trade negotiations would slow down significantly, and the age of trade agreements might be over.
The bottom line: This is probably a treaty we should pass, but it is not a treaty we should be proud of.
By the way, Heritage is now running a CAFTA blog. Russ Roberts has a more positive take on the treaty. Matt Yglesias says thumbs down.
Does the EU still have a core?
"There is no other country in Europe that will be as deeply affected by the ‘No’ as Germany," said Ulrike Guérot, senior transatlantic fellow at the German Marshall Fund in Berlin. "The French are no longer in a position to lead as part of a tandem… but Germany, because of its history, cannot claim leadership in Europe on its own."
Here is further discussion. I’ve long thought that a "no" vote would be a very serious event. Read Timur Kuran on preference falsification, not to mention Malcolm Gladwell on tipping points.
My next question: What does equilibrium look like when you have two major currencies, each of which must fall in value vis-a-vis the other?
Alex and I do *more* than just blog together
Should you be just a little more ambiguous about your commitment to heterosexuality (if indeed there is one)? After all, leaving it unclear can make life easier for gays. Making a point of announcing your mainstream orientation makes it hard for others to leave their preferences unspoken.
Or does it work the other way around? Perhaps we need openly gay friends and acquaintances to make society more tolerant. It is inducing people to come out of the closet which brings the positive externality. Positive declarations of heterosexuality ("My wife is very fond of Alex…") should then be encouraged.
Are you interested in "tipping" issues, and the social construction of norms? Read the new, excellent, and surprisingly analytical Straightforward: How to Mobilize Heterosexual Support for Gay Rights, by Ian Ayres and Jennifer Gerarda Brown.
Real (Estate) Rent Seeking
The Justice Department may file suit against the National Association of Realtors (NAR) to prevent them from excluding discount brokers from access to the regional MLS systems. I’m hardly a fan of antitrust but the market for realtors is a racket. Six percent to sell a house? Outrageous!
Putting aside the outrage the market for realtors is terribly wasteful. Consider, house prices are much higher in California than in Idaho but commissions are stable at around six percent. Thus, even though the realtor’s job, brokering a deal, is the same in California as in Idaho, a realtor in California will make much more per-house. As a result, there are far too many realtors in California and many of them will spend an entire year selling only a handful of houses. Indeed, many realtor’s spend most of their time prospecting for clients rather than actually selling houses – this is a huge waste of resources.
The same relationship holds over time as over space. That is, when house prices go up we don’t see a fall in commission rates. Instead, we see more entry. Since the same number of houses are being bought and sold, the extra realtors don’t make the buyer or seller better off and sadly the realtors aren’t better off either – instead the excess return is siphoned off in wasteful prospecting for clients.
Unfortunately, no one really understands why commissions are stable. The answer is not monopoly. It’s very easy to enter the market for realtors. So why don’t commissions fall? One can certainly point to some restrictive practices by the NAR but I don’t think that is the whole or even the major part of the story.
A clue to the puzzle is that we also see stable commission rates in law (contingency fees) and in services (tipping). Why is the appropriate tip 15% at an expensive restaurant and at a cheap restaurant? Does the tuxedoed waiter really have a harder job than the diner waitress? Maybe (indeed, I have argued along these lines elsewhere) but the commonality across these very different markets tells me something else is going on.
Is it signaling? Would you distrust a realtor offering lower commissions? Again, maybe, but it’s hard to believe that with so much money at stake there aren’t enough people willing to take a risk on a discount realtor for long enough for reputations to be established. I think part of the problem in the realtor market is that other realtors can easily discriminate against discount brokers by pushing their clients one way or the other – that says the antitrust actions will probably not be very effective. But this doesn’t explain stable commissions in law or waiting.
It’s a puzzle and one worth solving. Comments are open.
The marginal product of NBA players
Most of you have read Moneyball by now, so why not measure the marginal products of NBA players as well? After all, playoff time and the MVP award are just around the corner. Wayne Winston, professor of decision sciences at Indiana University, has tried to crack the numbers:
“Basketball’s a team sport, and lots of things aren’t tracked,” Winston says. “Like taking the charge, going through a screen, tipping a ball to your teammate, saving a ball from going out of bounds. That’s where our system comes in. All these little things should translate into points.”
One problem: Traditional plus-minus systems tend to overrate average players on good teams and underrate good players on lousy ones. After all, a zero plus-minus rating on the Los Angeles Lakers is not the same as a zero rating on the Los Angeles Clippers, mostly because one team has Kobe Bryant and Shaquille O’Neal and the other has Marko Jaric and Chris Kaman.
To compensate, Winval’s ratings are weighted to take into account every other player on the floor. For every time segment a player is in a game, the system tracks the other nine players on the floor, the length of the segment and the score at the start and end of the segment.”
In other words, he tries to measure marginal product in terms of points, adjusting for the values of the other players. The system is called Winval, here is the article, the paper version has more information. And who comes out on top? Please sit down, the five best players in the NBA, according to this measure are:
1. Hedo Turkoglu (who? he plays for San Antonio but doesn’t even start)
2. Vince Carter (a well-known star, but universally considered soft and a choker)
3. Kevin Garnett (the likely MVP for this year)
4. Brad Miller (very good player, but not elite)
5. Manu Ginobili (very good player, perhaps headed toward elite status)
Shaq, Kobe, and Tim Duncan are not in the top ten. None of the five, except for Garnett, crack a recent USA Today straw poll for NBA mvp. (By the way, here is last year’s Winval list.) Now maybe these rankings are right and conventional wisdom is all wet. Marginal product is, well…marginal product. But what are some other options?
1. A player with a high rank could have a really bad replacement, thus boosting his measured marginal impact.
2. Some players are “momentum” players, they are put in when the tide is turning.
3. Some players are wonderful for the time they play but could not keep it up for the whole game. They look great when you see them, but they are not worth very much overall.
4. The econometric model is somehow misspecified, but of course you can always say this.
The bottom line: I’m still puzzled by how much the measurements diverge from common sense. The NBA offers gobs and gobs of measurable information. Yet intuition remains indispensable when we try to estimate marginal product. By the way, Winval predicts that Mitchell Butler (who?, 13.4 minutes per game) is the best Washington Wizard.