Category Archives: economics

Money, Money, Money

Posted by Jeff Milner on January 29, 2011 No comments

This American Life LogoAs I’ve mentioned previously, This American Life has been presenting an ongoing series about the financial crisis and the economy. Below is a list of the relevant entries so far. I recommend you listen to them all.

Political lobbying is like an all-pay auction

Posted by Jeff Milner on November 2, 2009 No comments

David Zetland teaches Environmental Economics and Policy 100 at UC Berkeley. In this YouTube clip from one of his lectures, he demonstrates how political lobbying is like an all-pay auction (an auction where you pay your bid regardless of whether or not you actually bid the final, highest bid).

[YouTube - Political lobbying explained through the example of all-pay auctions]

A sleazy online auction site, named Swoopo, uses a similar style auction to dupe suckers into creating a “sunk cost” and then extending the time, giving the competition time to recap their own sunk costs. Everyone is a loser in this game, do not play it.—see Metafilter’s writeup.

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Cocksure

Posted by Jeff Milner on July 24, 2009 No comments

Malcolm Gladwell’s new article, Cocksure, is about the psychology of overconfidence. In it he postulates that the brashness of experts caused the current financial crisis.

Since the beginning of the financial crisis, there have been two principal explanations for why so many banks made such disastrous decisions. The first is structural. Regulators did not regulate. Institutions failed to function as they should. Rules and guidelines were either inadequate or ignored. The second explanation is that Wall Street was incompetent, that the traders and investors didn’t know enough, that they made extravagant bets without understanding the consequences. But the first wave of postmortems on the crash suggests a third possibility: that the roots of Wall Street’s crisis were not structural or cognitive so much as they were psychological.

This American Life on the Financial Crisis

Posted by Jeff Milner on October 8, 2008 No comments

If you’re confused about what caused the greatest financial crisis since the depression, let This American Life teach you in words you can understand, how the mortgage lending crisis started, with their episode—The Giant Pool of Money and follow-up with their episode Another Frightening Show About the Economy in which we learn:

  1. How and why the credit markets froze?
  2. What are “credit default swaps” and how do they propagate hardship to every sector of the economy?
  3. Why aren’t “credit default swaps” regulated?
  4. What will the bailout do and is it a good thing?

If this interests you, you might also want to check out the NPR: Planet Money Podcast.

The Dilbert Economy

Posted by Jeff Milner on September 16, 2008 No comments

Scott Adams, creator of Dilbert, wondered why someone wasn’t doing something that would give American voters useful and unbiased information about which candidate has the best plans for the economy.

Then he realized that he was someone.

He commissioned a survey of over 500 economists, drawn from members of the American Economic Association, a nonpolitical group, that had previously agreed to be surveyed on economic questions.

The economists were asked to rank the most important economic issues and pick which candidate they thought would do the best job on those issues.

Here are the results:

Rank Issues Obama McCain No Diff.
1 Education 59% 14% 27%
2 Health care 65% 20% 15%
3 International trade 26% 51% 23%
4 Energy 61% 22% 17%
5 Encouraging Technology/innovation 43% 23% 34%
6 Wars and homeland security 58% 30% 11%
7 Mortgage/housing crisis 41% 18% 41%
8 Social Security 40% 24% 35%
9 Environmental policy 72%  9% 19%
10 Reducing the deficit 37% 29% 33%
11 Immigration 33% 29% 38%
12 Increasing taxes on wealthy 79% 14%  7%
13 Reducing waste in government 16% 38% 46%

Adams is quick to point out that even though economists favour Obama in 11 of 13 of the most important issues (as decided by the survey) 48% of economists are Democrats and only 17% are Republicans.
It makes you wonder, are liberals more likely to go into economics, or are economists more likely to become liberals? Or is it just the simple fact that educated folks tend to be more progressive?

You can check out the full report (in Power Point format).

Are Children’s Car Seats Over Rated?

Posted by Jeff Milner on June 24, 2008 No comments

Steven Levitt, of Freakonomics fame, at a 2005 TED Talk speaks about the economics of car seats. His data lead him to ask the morally difficult question, are children’s car seats worth the time and expense it takes to use them?

Hit play or watch Steven Levitt on child car seats at TED.com.

Canadian Dollar Goes Par

Posted by Jeff Milner on September 20, 2007 No comments

Today, for the first time in my lifetime (and since 1976 if you want to get specific) the Canadian dollar was worth slightly more than the US’s famous greenback. If this trend sticks, I’m tempted to hit up Disneyland for a Christmas vacation, or maybe a pre-Christmas vacation.

How Would You Attack?

Posted by Jeff Milner on August 12, 2007 No comments

Freakonomics Blog

Over on the Freakonomics blog, Steven D. Levitt asks the thought provoking question, what would you do to maximize terror if you were a terrorist with limited resources. Readers’ responses to the post were a mixed bag of terror suggestions and hate mail. In a follow-up post, Levitt says that, “The people e-mailing me can’t decide whether I am a moron, a traitor, or both”.

Personally I think it’s an interesting topic, and not one that will give “the terrorists” any ideas they never had before. Hopefully it will provide those in charge of terrorist prevention and response to be better prepared in the event of domestic terror attacks.

In Canada, I think the biggest vulnerability to terrorism would be if they took out a couple of train bridges and brought Canadian commerce to a stand-still.

Because of the layout of the country (something like 80% of our population lives within a couple hours of the border) the transportation networks run basically east to west. I’ve been told there are only two main lines that run parallel across the country. A huge percentage of our goods arrive via sea in Vancouver and are shipped across the country by train. Disabling the tracks in the middle of the country would cripple this process, and doing so probably isn’t much more complicated than a couple of properly placed explosives.

Removing just two very vulnerable bridges, one in Medicine Hat and another in Edmonton, would be enough that virtually no goods could travel across Canada. I have no idea how long it would take to rebuild a train bridge, but it would definitely be the worst terror attack in our country’s history.

So what could be done to prevent such an attack? Building bomb proof bridges is not exactly an option. Putting up security guards around the bridges probably would work, but who wants to pay for that—not to mention the fact that because on any given day the chances of a terrorist strike against the bridges is so slim, it might be ineffective anyway unless the guards are always particularly vigilant.

I guess the best I can do for peace of mind is try not to think about it.

Update: Levitt’s third post on terrorism.

Freakonomics: A Rogue Economist Explores the Hidden Side of Everything

Posted by Jeff Milner on January 22, 2006 No comments

Sumo wrestlers are to teachers as real estate agents are to Ku Klux Klan members—or at least these are a couple of ideas put forth by the book I got for Christmas, “Freakonomics”. The book makes some startling connections between seemingly incongruent situations.

Freakonomics Cover

Economist Steven Levitt and journalist/contributor to the New York Times Magazine Stephen Dubner’s have co-authored this much talked about book from 2005. I’ve been devouring it in my spare time and I’m loving every page. It’s hard to describe exactly what the book is about because the most unifying theme one can identify within it, is that using statistics you can disprove a lot of conventional thinking.

I’m just about finished it, but in the meantime I have also been enjoying some of their other writings, both at the Freakonomics Blog and as guest posters on Google’s Blog. I have to wonder, what would Levitt do if he had access to Google’s information? Seems like there is a whole other book there waiting to be written.

If you enjoyed my previous recommendation of Blink, by Malcolm Gladwell, then I definately think you should check out Freakonomics. Oh, and if you’re interested, the chapter excerpts will give you a little taste as to how sumo wrestlers are similar to school teachers.