Shocker: it's not all about final price

Found a good article demonstrating the effect of salience on how we respond to costs. It uses the e-z pass system to look at how we are less responsive to less salient taxes (that is, more mentally taxing to remember, or not at the forefront of our consciousness). Unsurprisingly, it finds that less salient taxes produce fewer distortions. I like the article not because of its findings so much, which I consider intuitively obvious, but because E-Z pass is the perfect system to look at for showing the salience effect so starkly and nearly irrefutably. Wish I'd thought of it!

I came across the article via the Freakonomics blog. The poster there, Ayres, makes the case for irrational-number taxation using the same (though I do not think he's seriously advocating it). The idea is that you take some less salient number (he uses e^2) and set that as our sales tax for less distortionary effect and higher tax revenue. This idea intrigues me, and it'd be fun if we lived in a world where such thinks could be easily experimented with to see the results.

Out of sight, out of mind is one thing. If you're not presented with something directly it will be less salient, sure. But as far as this sales tax system is concerned, I don't think you'd get much out of sight, out of mind effect. You'd be looking more at difficulty to recall itself, given most people won't know Euler's number off hand. But I suspect that the result will just be that people don't concern themselves at all with Euler's number, but will simply round the final product off to one or two decimal places as Ayres himself does in the article, and that will be it, never again trying to calculate Euler's number or its square. So the total effect would just be that the remainder which has been rounded off has no effect on their behaviour.

Getting back to the idea of out of sight, out of mind, I've long since had the suspicion that fees serve this role for firms, to a large extent. I tried a while back to find research to back up this suspicion, but I was unsuccessful. I know it must be out there but it eluded my first attempt. My postulation is that because fees are often not obviously tied to costs, or that even when they are they are not well advertised at the point in the decision making process where the agent starts to form their opinions on whether or where to purchase, the fee will have less effect on purchase rate than a straight-up increase in price equal to the amount of the fee.

If this theory holds water, could we expect over-consumption of goods with higher fees? Assuming of course that gains in fee income are offset by drops in base price, as one would expect in an effectively competitive market. While the previous paragraph seems to make intuitive sense to me, the above sentence seems paradoxically improbable, making me think I'm missing something important in my reasoning...

A fond childhood memory

I was in a group when I was younger that did annual pinewood derby races. For anybody who doesn't know, that's where you take a small block of wood and carve out/weight a car.


After pouring over the official rules I came up with this design:


You see, the cars are held in place at the starting line on the sloped track by a simple peg in the center of each lane, each attached to a lever which is turned to begin the race. I was of course incredibly happy with myself. I thought I was a genius. I'd get a good 4-5 inch jump on all the other cars and annoy the authorities (as I said, I poured over the rules before hand).

Much to my chagrin, they took my car off the table to prep it, stared at it perplexed for a few seconds, and flipped it around backwards on the track. Needless to say, I was crestfallen.

This was the next year's design:


^_^

Wish me luck

I've been putting it off and putting it off, but the time has come. This is something I should have done a long time ago. I am going to read The Wealth of Nations.

God help me.

trying hard to dodge studying

http://imgs.xkcd.com/comics/alternate_currency.png

All just a little bit of history repeating

So we had a guest speaker from the financial industry in one of my classes, and he asked who we thought was to blame for our current situation. My immediate reaction surprised me. I said it wasn't at all clear to me that anyone had messed up. I have spent countless seconds (because really, who counts seconds?) figuring out why I said that, and I think my subconscious from which the answer leapt has a point.

Has there ever been, anywhere in the modern world, a country that has endured a century or even a half century without a serious financial crisis? If not, if there is no exception, then isn't it reasonable to assume that it is the rule? Maybe it's just the way things are? Maybe it's just a testament to the fact that we haven't yet figured out why things are cyclical as they are. Know what I mean? It's just systematic shortcomings, not component failures.

Be warned

This should be of no interest to anyone.

Oh bugger

I'm sure everyone but me has heard this, but I've been preoccupied with school and so forgone reading the news. Obama to name Hillary Clinton Secretary of State? That's just mean Mr. Obama. You've already won, no need to pretend you like her anymore.

What up with this crazy economy?

It's times like this we're reminded why laypersons might easily perceive macro-economists as a bunch crackpots.

Obama gives Summers a job after all

Lawrence Summers will be the director for Obama's National Economic Council. WSJ equates that to being his chief economic advisor? I don't know much about advisory titles, but I take their word for it.

Not a bad move probably, with Summers' past. I don't necessarily disagree with any of the things he's said which have gotten him into hot water, but he, like myself, seems to lack tact and political savvy.

Glad he'll be playing a role at least.

I've never heard of this Geithner fellow. Time to hit up Wikipedia!

What makes Dubai such a happening place anyway?

from gizmodo.com

Methinks this thing scans only the first page

http://www.typealyzer.com/index.php?lang=en
63 posts in total prior to this, and one short entry alters my type.
That would explain how it reaches its conclusion so swiftly.


Pre-Yarr-post:
The analysis indicates that the author of http://crappyconomist.blogspot.com is of the type:
INTP - The Thinkers
[INTP]
The logical and analytical type. They are especialy attuned to difficult creative and intellectual challenges and always look for something more complex to dig into. They are great at finding subtle connections between things and imagine far-reaching implications.

They enjoy working with complex things using a lot of concepts and imaginative models of reality. Since they are not very good at seeing and understanding the needs of other people, they might come across as arrogant, impatient and insensitive to people that need some time to understand what they are talking about.

Post-Yarr-post:
ISTP - The Mechanics
[ISTP]
The independent and problem-solving type. They are especially attuned to the demands of the moment are masters of responding to challenges that arise spontaneously. They generelly prefer to think things out for themselves and often avoid inter-personal conflicts.

The Mechanics enjoy working together with other independent and highly skilled people and often like seek fun and action both in their work and personal life. They enjoy adventure and risk such as in driving race cars or working as policemen and firefighters.

Yarrr

This is another good example of a thing which is terrible and should be vigorously discouraged, but is simultaneously very cool.

A lot of terrible/idiotic/dangerous things are also very cool. Someone the other day told me that a group of 15 motorcyclists getting together on a major interstate and popping standing wheelies at full speed was not cool! Bollocks!

Thievery is another example of bad/cool. Before you try to argue, consider heist movies/novels/shows and how well the genre has done for itself. "Thinking" thieves have undeniable appeal as protagonists.

If something cannot continue forever, it won't

UPDATE: The CEO's from GM, Chrysler and Ford all arrive in DC for congressional hearings on private jets.

I'm a little bothered, if not at all surprised, by the snowballing push to bail out the Detroit 3 automakers (beyond the 25 billion already slated). The argument I'm hearing is that, like Fannie and Freddy, they are "too big to fail". They employ too many people, both directly and indirectly. What I am not hearing is how the auto industry is very much different than any other industry in the country.
Is it purely the size that is our concern? Do we grant a federal guarantee to any company who achieves a certain threshold girth? If so, if we really cannot let any large employer fail, there is very little reason for them to improve performance much, right? And doesn't this weird incentive scheme only tip the balance more in favor of markets players combining and concentrating market power?
If we accept that companies beyond a certain corpulence cannot be allowed to fail, is it not the logical conclusion that companies should be disallowed from reaching same said status?

Further, I reject the statistics for the number of jobs the country stands to lose in the case of one or more Detroit 3 failures.

Firstly, while I don't claim to really know too much about such things, it was my understanding that companies did not altogether cease existing when declaring bankruptcy and sking for protection from creditors. Either they try to recover, retool themselves, and move on or they are subsumed whole or piecemeal by others.

Secondly, many of the jobs, such as parts supplies, repairs, etc. would continue even if not one more GM car were ever to be sold. Fewer parts would be needed, and repair services demand would decline over time, but neither would be a wholesale loss.

Finally, if there is any case to be made for saving them, then they must be selling some amount of automobiles. If they should suddenly stop doing so, I doubt it'd take too very long for somebody to step in and merrily absorb the market share, automagically creating/saving some jobs.

Basically, my argument is this:
If we are saving them for the sake of saving an American business, why not Mom and Pop's Corner Store? If it is because they are too big to fail, why let them become so big? And if we decide we can't/shouldn't stop them from becoming so big, but wish to eliminate punishing market forces, why not just nationalize?

Now, all of the above and everything it is responding to is a dog and pony show, of course. This has nothing whatever to do with common sense, realistic doctrine, American pride, or ethics. This has everything to do with lobbyists, demographics, selfish executives/laborers, and political expediency.

Not yet elected, and Obama's starting to prove he's YAP. Not that he's alone in this, but live by the labor unions, die by the labor unions.

Why Bruce Lee is my Hero / Why I Love Laptops

An ok man is one who endeavors to live according to his principles;

A good man is one who endeavors both to live according to his principles and to constantly improve upon his principles;

A great man is one who succeeds at both.

This maxim brought to you from my bathroom.

This is sweet

http://www.zefrank.com/from52to48withlove/

It's a good message. Can't we all just get along?