Tuesday, October 7, 2008

McCain + Sunoco + Earnhardt = Prius?

Here is the day's enigma I saw while driving home from work:

A Toyota Prius with a John McCain, Sunoco Gas, and Dale Earnhardt Jr. bumper stickers.

Source: My own two eyes, not making this up.

Sunday, September 21, 2008

My Grade Support Yields a Surplus

Every year I create an effective grade floor [minimum wage] in my AP Economics classes. Basically, I view homework as a way to support low grade producing students.

For example, while grading a detailed supply and demand homework assignment, the average grade given was a 7 out of 10 possible points. In some cases, students that received a 7 out of 10 actually got less than 70% of the questions correct. The equilibrium average grade probably would have been a 5.5 or so without my sympathy.

Every grading period yields a surplus of points due to my grading policies. I have effectively stripped the grading market of its rationing function.

Friday, September 19, 2008

My Favorite Quote On The Financial Mess

From Steven D. Levitt:
As an economist, I am supposed to have something intelligent to say about the current financial crisis. To be honest, however, I haven’t got the foggiest idea what this all means.

Saturday, September 13, 2008

Economics vs. Finance

One of the first points I like to make to my AP Economics classes is the difference between Economics and Finance [Business]. On the very first day of class each year, I explain to my students that they will not learn how to make their first million in this class. From there, I define Economics for them. This week, I had the opportunity to show them using Lehman Brothers as an example.

The government and Fed are, or should be, concerned about the moral hazard principle. However, the financial institutions seem to view the current crisis as a bluff game; that if it came down to it, the government would provide tax dollars to bail them all out. The bluff game is a finance [business] strategy while the moral hazard concern is an economics concept. In most cases these days, it seems like the Wall Street wizards have this game perfected.

Wednesday, August 13, 2008

How Basic Economics Kept My Rent Stable, Today

This morning I blasted my computer speakers in order to hear my iTunes in the shower. Less than 2 minutes later, I thought about the noise [a negative externality] that my landlord and his customers are experiencing downstairs. Next, I thought about a possible threat of a rent increase [a tax] next year to limit this noise pollution. For me, the thought of this threat, alone, served as a correction of this external cost [leftward supply shift].

Friday, August 8, 2008

John McCain Ad Confuses Basic Macro Concepts

"The real Obama promises higher taxes, more government spending, so fewer jobs."

I guess the excerpt above, from the economic perspective, would further defend today's Krugman article where he proclaims the Republican party, "the party of the stupid."


The Fans Want Cheaper Concert Tickets

I enjoy attending rock concerts very much and try to see as many shows that my time and wallet permit. Over the last couple years I have noticed that arenas have been far, and I mean far, from sold-out at many shows.

I see this as a response to very high ticket prices and absurd Ticketmaster service charges. When 30-50% of the seats are empty [a surplus], shouldn't that send a signal to Ticketmaster to cut prices? I believe the demand for most concerts are relatively price elastic (there are exceptions like a Led Zeppelin reunion show) therefore lower prices should only increase revenue.

Ticket promoters seem to be in the process of researching this idea. After a handful of shows failed to sell many tickets at regular prices, LiveNation devoted July 29 to $10 tickets for select shows. Sounds good to me, but what about all the people that paid over $70 with service charges for the same ticket? Here, I am reminded of the textbook example of a price discriminating monopolist.

Thursday, August 7, 2008

Crossing a Busy Street

There are two types of people that cross a busy street when cars are coming: the type that thinks a car should slow down because they are in the middle of the street and the type that runs across because they know they aren't supposed to cross there anyway. I believe most people fall into the latter.

The people that run across the street recognize that cars go fast and can kill them if they are struck; for me, a simple cost benefit analysis and some rational human behavior explains these types.

The people that take their time and expect the cars to slow down for them, are the selfish, self-centered, and higher risk taking individuals that are very trusting of drivers. They also don't mind getting honked at, cursed at, or any single-finger expressions waved at them. But, I wonder. Are these the types that are more likely to start their own businesses, become CEOs, invest their 401ks in riskier funds, thus ultimately ending up with the better chances of earning higher salaries?

Tuesday, August 5, 2008

Office Max Back-to-School Penny Promotion

I have been saying for years that it is time to get rid of pennies and time to start rounding.

Saturday, August 2, 2008

Donation Wednesday at the Bronx Zoo

I attended the famous Bronx Zoo donation Wednesday day when the Zoo is mobbed by people, camps, and schools. The deal is that admission is free but you should make a donation to the Zoo for each guest in your party. The suggested minimum donation is $5 (Regular Zoo admission is $15). Judging from the look on the ticket window employee's face, they were not always getting that $5. Why? Is it because many people really cannot afford the $5 or are they taking advantage of this "free" day? I am sure that money not spent on the ticket goes to other sources in the Zoo such as food and drink, which yields a very high margin for the Zoo.

I also wonder if everyone is honest when the admission window asks "how many in your group today?" Dan Ariely writes in Predictably Irrational that honesty is tremendously important in our economy and Adam Smith would even agree. Ariely argues that people should carry around the "10 Commandments" or read the Bible or Quran, for ethical reasons. Meaning, that moral codes keep people honest especially when some higher power is watching over. I found this to be a very interesting point, except I wondered about the many atheists, satanists, and apathetic people out there. Is there a code of conduct in Satanic cults?

If you've ever been to the Bronx Zoo, you would know that the sea lions rule, the monkey house is cool, and the gorillas are just awesome! However, I could not believe the rudeness of the people there; the pushing and shoving, and even elbowing with a "sorry" rarely expressed. It was mind boggling to me. Has parenting become that bad? Does the marginal cost of teaching your child good manners outweigh the benefits?

Also, I noticed two young girls by the bison. They walked up to the exhibit, and one exclaims "oh cool," rather loudly because her iPod was blasting in her ear that I could even make out the hit single by Flo Rida. Then she picks up her Team Mobile Sidekick, and starts typing ferociously on the mini keypad. Why bother going to the Zoo?

How can we better our society and economy? The answer in the long run is always simple...EDUCATION. Teach your kids good manners, teach them how to enjoy the little things in life, teach them how to contribute in a positive way, teach them how to say "sorry" and "thank you," and teach them the importance of education so that they can pass on the important values to their kids someday.

Friday, July 25, 2008

Why I Dislike Escalators

Have you ever walked down or up a broken escalator? It can be dizzying. Additionally, I don't feel that escalators are really that convenient or efficient in terms of the amount of energy they waste, as they are constantly running, and they really don't see much human action on a Tuesday afternoon at the mall.

Also, how many calories are not being burned when you take the escalator instead of the stairs?

The late comedian, Mitch Hedberg, summed up escalators the best with this quote:
An escalator can never break. It can only become stairs. You would never see an "Escalator Temporarily Out Of Order" sign, just "Escalator Temporarily Stairs. Sorry for the convenience."

Thursday, July 24, 2008

What's up with the weather, man?

Here is a place where the incentive system is completely screwed up: The Weather!

The so-called meteorologist or weatherman on the local news can get the weather wrong, two or three days in a row...and they are never held accountable.

Maybe we need better incentives such as: you get the weather wrong twice in a week, then you are denied some pay.

Make it a performance-based system. Is there really a way to cheat when it comes to predicting the weather?

Not unless you can pull a "Back to the Future Part II," when Marty McFly buys the Sports Almanac in the future to take back to 1985.

Addendum: I was angry and frustrated this day because I wanted to go to the Zoo. I am sorry to all weatherman for any inconvenience from my crusade against you.

Monday, July 7, 2008

Caveat Emptor: The high price of a New York City concert

Pearl Jam put on their best New York area show in a long time at Madison Square Garden on Wednesday June 25, 2008. They came out strong opening the show with "Release," which led to a massive MSG sing-along. Eddie Vedder later led the band through some rare treats such as "Garden" and "I'm Open."

The three main highlights for me were:

  1. "I Believe in Miracles" featuring CJ Ramone rocking the bass guitar!
  2. Eddie Vedder giving a shout out to the recently retired Brian Leetch of the New York Rangers followed by "Let's Go Rangers" chants.
  3. And finally the performance of Kiss's "Black Diamond" with Space Ace Frehley on lead guitar and drummer Matt Cameron on the vox.

Pearl Jam still puts on one of the best live rock shows out there. It's the type of concert where you never want the band to stop playing, even after a solid 2 hours 45 minutes of Rock godliness.

Now were all these treats really worth the money?

My ticket ran me $100 on the secondary market (Stubhub);
Train ticket with Metrocard came to $17;
Food/Drinks prior to the show $75 (Houlihans in Penn Station - absolute ripoff for one greasy appetizer and 4 drinks in my opinion);
Total monetary cost of $192.

I would have been willing to spend up to $200 for my ticket alone so I made out well. I guess ticket prices are not that high after all.

But what if Ace Frehly and CJ Ramone did not show up to the show? Then I probably would have only been willing to spend $100 per ticket, and it would not have been worth it for me.

This has been a major issue for me; The ticket sellers (ticketmaster/stubhub) do not offer any satisfaction guarantee.

The Stone Temple Pilots concert at PNC Bank Arts Center on May 31 was awful. The lead singer showed up over an hour late and put on a disgusting performance. Aren't I entitled to at least a partial refund?

Unpredictability of prices

I recently played the classic "$5 auction" game in class to introduce game theory to my students. I like doing this game in two rounds; One round without collusion and one with collusion.

Round 1: First I tell the students that I will give the $5 bill to the highest bid which is submitted on a piece of scrap paper with their name on it. Students are not allowed to talk (collude) during the bidding process. Next I read the bids to the class and give the $5 away to the highest bidder.

Round 2: Then I tell the class I want to give away more money. I tell the students to write down their bids, but that I also have to talk to some teacher down the hall, leaving the room for a few minutes (hopefully the class sees this signal to collude/cheat at this point.) When I come back I read the bids then give away the money to the highest bidder. Finally, class discussion of what happened during the game springs us into game theory.

I played this game in three different AP Microeconomics classes this year and ended up with bizarre outcomes. I actually made 4 cents in the first class, $6 in the second class, and lost $4 in the third class. After the game, we discussed what the logical outcomes to the game should have been. One class was too tired to realize that when I left the room, they should have cheated.

Even though the game had some irrational outcomes, it did show the unpredictability of behavior within a cartel or colluding oligopoly.

In the end, this teacher made $2.04 (Sweet!)

Entry from the Best of 'Just Enjoy the Show'

When 'dumbing down' is a substitute for 'understandable'

Oops, I upset someone on Marginal Revolution for using "dumbing down" to describe the content of Freakonomics and Discover.
"Meds, I'm not sure "dumbing down" and making understandable are the same thing. In fact, I am certain they're not. Can you understand having the flu without knowing how a virus invades your cells? Probably. One thing I like about these books and this blog are that the specialists don't withhold knowledge with the belief that the unwashed masses are incapable of understanding. Even with a shallow understanding, I suspect the layman is better off understanding something of economics rather than nothing at all."

I replied (using a silly economic principle, of course):

"...Good teachers need to make the subject matter (I don't care what it happens to be) interesting and understandable. That sometimes means getting rid of fancy terminology (due to overblown egos/narcissism/inability to teach) and the calculus (why I enjoy Levitt). In some cases the lousy professor's view of "dumbing down" and making something "understandable" could be substituted.

Oops, I said "substituted," Econ 101 time: If the price of saying "dumbing down" increases then demand for "understandable" increases. Therefore, I will use "understandable" in the future, unless of course there is a change in expectations.

I told you I was a junkie for "understandable" books explaining the basic economic principles."

Entry from the Best of 'Just Enjoy the Show'

Freakonomics, Naturalist, Discover...Which does it the best?

There have been so many books in the style of Freakonomics released over the last 5 years---meaning very readable and enjoyable economic applications for the individual that knows absolutely nothing about the dismal social science.

Discover Your Inner Economist
by Tyler Cowen, The Economic Naturalist by Robert H. Frank, and Unsafe Sex is Safer Sex by Steven Landsburg are just a few examples.

Obviously Freakonomics was not the first, but it certainly introduced and/or renewed a large interest in basic "101 economic" principles (in the blog-age).

So my questions is: Who does it the best?

Currently, I am leaning towards Levitt and Dubner for their fun factor, application of the principles (I love how there is no calculus), intelligent style, and it is an easy read even for my high school students that haven't yet taken AP Economics.

Entry from the Best of 'Just Enjoy the Show'

Ultimatum Game

I played the "Ultimatum Game" at a teacher's conference last year, except we only used 20 bucks in the game. I did something that seemed completely irrational and offered the other person $18 leaving only $2 for myself. Of course they accepted the offer, and everyone in the room thought I was an idiot (I am, but not because of that).

I explained that I wanted to make a random stranger happy and that was worth the $18 to me, but not $20. The reason I gave for keeping the $2 was so I could take the subway back to Grand Central Station.

Since the stakes in this game were so low I was willing to reverse what the article was explaining on fair deals. Additionally, I really just wanted to see if I could mess up the game's aim and confuse everybody, to simulate the average Econ student's participation.

So it really was not an irrational economic decision.