Thursday, February 29, 2024

Lighthouses Are Not Always Public Goods

This is really intersting. It comes from the Public Goods and Externalities entry at the Concise Encycopedia of Economics. It is by Tyler Cowen. It should also be mentioned that Nobel Prize winner Ronald Coase wrote an article about this that appeared in the Journal of Law and Economics in 1974. So here is the quote from the Tyler Cowen article:

"Lighthouses are one of the most famous examples that economists give of public goods that cannot be privately provided. Economists have argued that if private lighthouse owners attempted to charge ship-owners for lighthouse services, a free-rider problem would result. Yet lighthouses off the coast of nineteenth-century England were privately owned. Lighthouse owners realized that they could not charge shipowners for their services. So they didn't try to. Instead, they sold their service to the owners and merchants of the nearby port. Port merchants who did not pay the lighthouse owners to turn on the lights had trouble attracting ships to their port. As it turns out, one of the economics instructors' most commonly used examples of a public good that cannot be privately provided is not a good example at all."

Wednesday, February 28, 2024

Hawaii Considers a New Fee for Vacationers

In response to the Lahaina wildfires, the Aloha State is the latest hot spot to propose a conservation-related tourist tax

By Allison Pohle of The Wall Street Journal. Excerpts:

"Vacation destinations worldwide are re-evaluating the role tourists play in their communities and the toll overtourism takes on limited natural resources, with some installing new fees for visitors. Hawaii, which hosted more than 9.5 million last year, is the latest to consider a tourist fee that leaders say will pay to protect beaches and prevent wildfires.

The proposed $25 flat fee—which would be collected when visitors check into a hotel or short-term rental—is working its way through the statehouse and could be approved this spring."

"Greece and New Zealand are among destinations that now charge tourists a so-called climate tax, which can range from just over $1 to $100. This month, Bali started charging all foreign tourists a $10 fee to promote more sustainable tourism. This spring, Venice will charge a day rate to combat overtourism and cap day-trippers."

"The current climate-fee measure doesn’t raise taxes or fees on Hawaii residents, and places some responsibility for the natural resources on visitors and would increase awareness for the effects of climate change, Green has said [Hawaii’s governor Josh Green]. He projects the fee will bring in $68 million annually. Green said the money will go to establish a state fire marshal, install fire breaks to protect vulnerable communities and help with disaster prevention. 

Green also proposed that half of the fee revenue go toward disaster insurance. Without it, he said, high-risk areas will have trouble rebuilding and attracting investors."

This policy brings up issues like scarcity, Tragedy of the Commons and the Two-part tariff. These are explained in the related post listed below.

If a good is scarce (like enjoying Hawaii), there won't be enough to go around if it is free (no entry charge). If it is a common resource, it gets overused if no one owns it (like the public spaces people will be in when they come to Hawaii).

With the Two-part tariff, one example is "amusement parks where there are admission fees and also per-ride fees." If the park is a monopoly, they can charge a low price for each ride but charge a large admission fee to make their money back (and this can actually lead to higher profit than charging the normal monopoly price).

If Hawaii is like an amusement park, then you pay to get in and still have to pay, say, for going to visit The U.S.S. Arizona. Hawaii is a monopoly in the sense that there is nowhere quite like it and it is a group of islands and there are no other major attractions nearby. So this fee could lead to more revenue for Hawaii in the long run.

Related post:

Overrun by Tourists, Venice Plans Entry Fee for Day Trippers (2023)

Monday, February 26, 2024

Life is full of tradeoffs: if we want more nickel to make EV batteries we might have to use more coal

See One Country’s Dream of EV-Driven Prosperity Helps Fuel a Coal Binge Instead: Indonesia pitches its plan to leverage natural resources as a model for other developing nations by Jon Emont of The WSJ. Excerpts:

"A few years ago, Indonesia set out to turn its treasure trove of nickel into an electric-car manufacturing boom.

It imposed a sweeping ban on the export of raw nickel. That meant that companies wanting to tap the world’s largest source of the mineral—used in the most powerful type of EV batteries—would have to build smelters in Indonesia. Officials bet that factories to make EV batteries and entire electric cars would also follow, spawning end-to-end supply chains close to the mineral bounty.

The smelters came, and Indonesia’s nickel industry witnessed explosive growth. But powering it is a coal binge that is throwing off the country’s climate goals."

"Nickel smelters have led to a surge in coal use, with new coal plants coming up at a time when the world is trying to phase out the fossil fuel. A January report by Climate Rights International, a U.S. environmental group, said that a single nickel-focused industrial park located on eastern Indonesia’s Maluku islands will burn more coal than Spain or Brazil when it is fully operational."

Related posts:

Life is full of tradeoffs: it costs money to keep chemicals out of our water systems (2024) 

Life is full of tradeoffs: reaching net zero emissions by 2050 vs. the costs of the transition (2023) 

Life is full of tradeoffs: If we want more wind farms, we might have fewer jaguars & pumas and less water (2023)

Life is full of tradeoffs: we can preserve more natural & cultural treasures by giving up uranium that promotes cleaner energy & less energy dependence (2023) 

Life is full of tradeoffs: More Renewable Diesel Might Mean Higher Food Prices (2023) 

Life is full of tradeoffs: More wind power might mean more light pollution & noise (2023)

Life is full of tradeoffs, west Texas wind power vs. the Air Force, landowners, ecotourists, astronomers, archeologists and conservationists (2023)

Life is full of tradeoffs: more houses to help the homeless vs. more trees (2023)

Life is full of tradeoffs: if we want more graphite for car batteries we might get more emissions in making it or raise humanitarian concerns (2023)

Life is full of tradeoffs: If we support American workers with trade restrictions it might mean more inflation (2023)

Life is full of tradeoffs, wind power vs. fishing edition (2022)

Life is full of tradeoffs, reducing animal cruelty vs. increasing worker safety (2022)

Life is full of tradeoffs: If we want more historic preservation we might have to give up some solar panels (2022) 

Life is full of tradeoffs: We can have more bison or we can preserve archaeological sites (2022)

Life is full of tradeoffs: Adding geothermal power could hurt the environment (2022)

Life is full of tradeoffs: sustainability vs. competition edition (2022)

Solar Power’s Land Grab Hits a Snag: Environmentalists: Mojave Desert residents say they support clean energy, but not giant projects, citing threat to tortoises and views (2021)

Life is full of tradeoffs, the case of federal renters assistance (2021)

Life Is Full Of Tradeoffs: If We Want To Do More To Fight Climate Change We May Have To Lower Tariffs On Solar Panels Which Might Put U.S. Firms Out Of Business (2021)

Tradeoffs and anti-trust policy (2019) 

Tradeoffs: More Goods And Services Might Mean Less Clean Air (2013)

The Recession Cleaned The Air, Another Example Of How Life Is Full Of Tradeoffs (2011)

Environmentalists vs. . . . other environmentalists? Or, are birds more important than clean, cheap energy? (2007)

More Proof That Tradeoffs Are Everywhere: Blind People Don't Like The New, Quiet Hybrid Cars (2007)

Friday, February 23, 2024

The Dow Jones Average closed above 39,000 for the first time ever yesterday (Feb. 22, 2024). Should we thank President Biden?

I saw some people doing just that yesterday on Twitter (X).

One way to look at it is to see what was the percentage gain in the Dow from Jan. 20, 2017 to Feb. 22, 2020 (about the first three years when Trump was president). Then do the same for Jan. 20, 2021 to Feb. 22, 2024 (about the first three years when Biden was president).

Here are the relevant values for the Dow the first three years of Trump:

1/20/2017          19827.25
2/21/2020          28992.41
2/24/2020          27960.8

I show two dates since Feb. 22, 2020 was a Saturday and there was no trading.

Using 2/21/2020, the Dow was up about 46% (since 28992.41/19827.25 = 1.46). Using 2/24/2020, it was up about 41% (since 27960.8/19827.25 = 1.41).

Now for Biden 

1/20/2021          31188.38
2/22/2024          39069.11

The Dow was up about 25% (since 39069.11/31188.38 = 1.25).

Data is from a site called MeasuringWorth. Specifically from Daily Closing Values of the Dow Jones Average in the United States, May 2, 1885 to Present.

Thursday, February 22, 2024

Explaining the evolution of gossip

By Xinyue Pan, Vincent Hsiao, Dana S. Nau, and Michele J. Gelfand. This link has the entire article.


From Mesopotamian cities to industrialized nations, gossip has been at the center of bonding human groups. Yet the evolution of gossip remains a puzzle. The current article argues that gossip evolves because its dissemination of individuals’ reputations induces individuals to cooperate with those who gossip. As a result, gossipers proliferate as well as sustain the reputation system and cooperation.


Gossip, the exchange of personal information about absent third parties, is ubiquitous in human societies. However, the evolution of gossip remains a puzzle. The current article proposes an evolutionary cycle of gossip and uses an agent-based evolutionary game-theoretic model to assess it. We argue that the evolution of gossip is the joint consequence of its reputation dissemination and selfishness deterrence functions. Specifically, the dissemination of information about individuals’ reputations leads more individuals to condition their behavior on others’ reputations. This induces individuals to behave more cooperatively toward gossipers in order to improve their reputations. As a result, gossiping has an evolutionary advantage that leads to its proliferation. The evolution of gossip further facilitates these two functions of gossip and sustains the evolutionary cycle."

Related posts:

Why gossip might not be bad and how it works in business (2023)

Psychologist uses money in experiments to study how gossip can be useful (2021)

Tuesday, February 20, 2024

Joseph Schumpeter, Capitalism and Intellectuals

See Socialists, Knowledge of History and Agency. These are letters to the editor of The WSJ in response to an article about socialism by Joseph Epstein. The one below reminded me of a 1992 article by Robert Samuelson in Newsweek.

"Joseph Epstein’s “Socialists Don’t Know History” (op-ed, May 30, 2019) on the abysmal historical knowledge of young people brings to mind the prophesy of the keenest of economists, Joseph Schumpeter, in 1942 when he said that capitalism would destroy itself by breeding a “new class: bureaucrats, intellectuals, professors, lawyers, journalists, all of them beneficiaries and, in fact, parasitical on them and yet, all of them opposed to the ethos of wealth production, of saving and of allocating resources to economic productivity.” The 77 years since then has proven Schumpeter a major prophet.

Larry W. White
See also Schumpeter: The Prophet by Robert Samuelson (this is the article from Newsweek in 1992). Excerpts:
"He is best known for his evocative phrase "creative destruction." Schumpeter saw capitalism as a system that produces material progress-rising living standards, more creature comforts-through the turmoil of new technologies and business methods. The "entrepreneur," a man of great vision and energy (in his day, there were few women in business), was the driving force of change. Sam Walton and Wal-Mart fit his theory perfectly."

"It is precisely because the "gale" (his term) of creative destruction seems so ferocious that Schumpeter has enjoyed a revival. But he had a second stunning insight that also is relevant. He argued that capitalism's vast economic success generates popular dissatisfaction with capitalism. As prosperity increases, progress is taken for granted. Capitalism's remaining shortcomings-including the disruption caused by creative destruction-become increasingly intolerable. Finally,, prosperity expands the class of intellectuals who are contemptuous of capitalism."

""[C]apitalism ... creates, educates and subsidizes a vested interest in social unrest," Schumpeter wrote. Popular discontent and intellectual hostility would, he thought, doom capitalism and lead to socialism."

"capitalist economic success, because it is incomplete and interrupted, breeds its own backlash. The sour public reaction to the present slow economic recovery only highlights a longstanding trend. The growth of Big Government-here, in Europe and in most advanced market societies-has aimed to placate popular discontent without undermining capitalism's ability to raise living standards."

"Its [his book Capitalism, Socialism and Democracy] genius is to explain why capitalism succeeds as Adam Smith imagined, even though modern economies lack Smith's perfect competition with hordes of tiny companies. In today's industries, big firms often dominate and enjoy monopoly profits. But most monopolies are temporary, Schumpeter argued. Their high profits, far from stifling competition, inspire more innovation from entrepreneurs and big companies alike. Cable TV assaults the networks; fax machines replace mail; McDonald's invents fast food.

But the drawn-out nature of this process makes capitalism hard to defend politically, Schumpeter said. The argument for it "must rest on long-run considerations." The "unemployed [worker] of today [has] to forget his personal fate and the politician of today his personal ambition." This was not likely."

Related posts:

Are College Professors Liberal? (2006)

Why Do Intellectuals Oppose Capitalism? (2007)

Monday, February 19, 2024

Firms (that make EVs) lower prices when demand is less than expected

See Lucid Is Latest EV Maker to Cut Prices as Demand Ebbs: Pricing pressure hits unprofitable electric-vehicle startups hard by Sean McLain of The WSJ. Excerpts:

"Some electric-vehicle startups are making another round of price cuts to get more buyers interested amid softer-than-expected sales."

"The auto industry’s overestimation of EV demand during the past year contributed to a wave of price reductions and discounts designed to jump-start sales. Tesla—the top-selling EV company in the U.S.—as well as General Motors, Ford Motor, Hyundai Motor and Kia all cut prices as the pace of EV sales slowed."

"U.S. EV sales continue to rise, but the pace has slowed over the past year. Auto executives have said demand hasn’t evolved as quickly as expected, prompting some to delay factory expansions and other investment plans.

High prices are commonly cited in consumer surveys and by dealers as a major factor deterring potential EV customers. Electric models can run several thousand dollars more than comparable gasoline-powered cars, primarily because of the high cost of the battery."

"Several analysts have downgraded their outlook for EV startups in recent months amid concerns that price cuts combined with weak customer demand will make it harder for them to compete."

Related posts on supply and demand:

Renters Are Starting to Get Concessions From Landlords Again (article illustrates supply and demand principles) (2023)

Orange Juice Prices Are at Record Highs—and Could Keep Climbing (2023)

Apartment Rents Fall as Crush of New Supply Hits Market (2023) 

Why has the price of eggs risen so much? (2023)

Egg Prices Surge to Records as Bird Flu Hits Poultry Flocks (2022)

Is There A Booze Shortage? (2022) 

Drivers Throttle Back as Gasoline Prices Rise (2022)

Cold Snap Sparks Record Rise in Natural Gas Prices in Asia (2021)

Are Expectations Helping To Raise The Price Of Lithium? (2021)

Used vehicle prices up as supply sinks, but relief is coming (2021)

Car makers face ‘chipageddon’ (2021)  

Does the U.S. have a firefighter shortage (2021) 

There is no truck driver shortage in the US (2021)


Is there a shortage of homes? (2020)

Fastest-Rising Food Prices in Decades Drive Consumers to Hunt for Value (2020)

When demand for one good falls (gasoline and ethanol) leads to an increase in price for other goods (beer and soda) (2020)

Farmers might be reducing supply of corn now in expectation of higher prices this fall (2019)

What Chocolate Shortage? Cocoa Prices Steady as Record Output Projected (2019)

Why honey prices have climbed about 25% since 2013 (2019-This post is featured in Introduction to Microeconomics by Luís Cabral. He is chair of the economics department at New York University.)

Introduction to Microeconomics by Luís Cabral

Is there really a shortage of construction workers (2019) 

Was there really a shortage of meatless burgers? (2019)  

Supply, Demand and the High Price of Vanilla (2019)

Egg market seems to act just the way supply and demand predict (2019)

HowSupply Means Producing A Good And Customers Being Able To Purchase It (2018) 

India sets a price floor for sugar and gets a surplus (2018)

Supply And Demand Have Affected Beef Prices Recently (2017)

Is There A Christmas Tree Shortage? (2017)  

Will There Be A Pumpkin Shortage This Year? (2011)

Another Journalist Misunderstands Supply And Demand (2009)

Sunday, February 18, 2024

Rod Stewart Sells Song Catalog as Music-Rights Fundraising Surges

Investors pour billions of dollars into companies pursuing music-rights deals

By Anne Steele of The WSJ. Excerpts:

"Rod Stewart, the star behind such hits as “Maggie May” and “Da Ya Think I’m Sexy,” has sold his song catalog as the music-rights market draws a flurry of fresh capital. 

Stewart sold his interests in his publishing catalog and recorded music, as well as some name and likeness rights"

"The sale and Iconic’s [Irving Azoff’s Iconic Artists Group] fundraising are signs of a continued appetite for music rights and show how the once white-hot market has matured. 

Music catalogs, which generate relatively predictable, steady returns, became an attractive investment amid the low-interest rate environment of the pandemic."

"Major stars from Bob Dylan and Bruce Springsteen to Stevie Nicks and Neil Young cashed in."

"They [Iconic] say it builds value by better managing catalogs’ income streams and making documentaries and other projects focused on their artists and music." (this might explain why artists make this deal since they are giving up control of their future income streams-see a related reason below)

Related post:

Katy Perry Sells Catalog to Litmus Music (2023)

Why Are More Performers Selling The Rights To Their Music? Maybe Tax Laws  (2022) 

Excerpt from that post:

"Bruce Springsteen, for example, recently sold his master recordings and music publishing rights to Sony for $500 million. I assume an artist would not sell their music for less than the amount of future income it would generate.

But that future income would get taxed at 37%. Selling it now means they only get taxed 20%. So that is a good deal for the artists.

The company buying the music could come out ahead if they pay a little less than what the music is worth because the artist does not need the full price. Why not? Because they are getting such a good tax deal they can sell it for less than it is worth.

If your music is worth $100 but you sell it for, say, $90, you still come out ahead. If you earned $100 by keeping the music, you pay $37 in taxes and you are left with $63. But if you sell it for $90 and only get taxed 20%, you pay $18 in taxes. That leaves you with $72, more than $63."

Saturday, February 17, 2024

Robots writing science fiction

See AI-generated science fiction novel wins literary prize in China by Justinas Vainilavičius of Excerpts:

"It only took three hours for Shen Yang, a professor at the Beijing-based university’s School of Journalism and Communication, to generate the award-winning admission.

The Chinese-language work, entitled The Land of Machine Memories, won second prize at the 5th Jiangsu Popular Science and Science Fiction Competition."

"the draft of over 40,000 characters was generated based on 66 prompts, suggesting a “Kafkaesque” writing style."

"The protagonist of The Land of Machine Memory is a metaverse adventurer called Li Xiao, who is on a quest to retrieve the lost memories from her real-world life as a neural engineer.

Shen submitted the work under the pseudonym, the only contestant to do so. Three of the six judges voted in favor of the manuscript, which secured it a second prize honor."

"According to Shen, his entire competition entry was generated by AI, including the outline of the novel, the illustrations, and even his pen name, which translates as @SiliconZen."

"In April, a Berlin-based photographer won the Sony World Photography Awards with an AI-generated image, only to reject the prize."

Related posts:
Rent a robot for Christmas? Makes sense if you are a logistics company (2022)

Walgreens Turns to Prescription-Filling Robots to Free Up Pharmacists (2022)

Answering the Call of Automation: How the Labor Market Adjusted to the Mechanization of Telephone Operation (2022)

Many Jobs Lost During the Coronavirus Pandemic Just Aren’t Coming Back (2021)

Can computers write poetry?Could they replace poets? (2020)

Will computer programs replace newspaper columnists?  (2020)

McDonald’s Tests Robot Fryers and Voice-Activated Drive-Throughs: Burger giant wants to speed service as competition for fast-food diners mounts (2019)

Is Walmart adding robots to replace workers or because it is hard to find workers? (2019)

Robot Journalists-A Case Of Structural Unemployment? (2010)

Structural Unemployment In The News-Computers Can Now Tell Jokes  (2013)

WHAT do you get when you cross a fragrance with an actor?

Answer: a smell Gibson.

Robot jockeys in camel races (2014)

Are Computer Programs Replacing Journalists? (2015)

Automation Can Actually Create More Jobs  (2016)

The Robots Are Coming And It Might Not Be A Case of Structural Unemployment  (2018)

Broncos to debut beer-pouring robot at upcoming game (2018)

Robots Are Ready to Shake (and Stir) Up Bars (2018)

Is Covid causing some structural unemployment? (2020)

Is Covid causing some structural unemployment? (Part 2)

Warehouses Look to Robots to Fill Labor Gaps, Speed Deliveries  (2021)

Is unemployment still high because of structural unemployment?    (2021)

The Pizza Delivery Guy Will Be a Robot at Many Campuses This Fall  (2021)

Thursday, February 15, 2024

Self-Control as a Performance-Enhancing Drug

Like cognitive ability, self-control predicts health, wealth, and all things good

By Steve Stewart-Williams. He is a professor of psychology and author of The Ape That Understood the Universe (2018) and Darwin, God and the Meaning of Life (2010). 

"Just a quick note today to share with you one of my all-time favorite graphs. It’s from a classic paper by the psychologist Terrie Moffit and colleagues, and it shows how self-control measured in childhood correlates with a range of important adult life outcomes. Long story short, self-control is an all-purpose good like IQ: It predicts health, wealth, and all things good.


What are the implications? The main one is that interventions to increase self-control could potentially greatly enhance human wellbeing. And the good news here is that people aren’t quite as uncomfortable with the concept of self-control as they are with the concept of IQ. That means we might more easily be able to make some headway.

Anyway, the paper is open access, so you can read the whole thing for free. Here’s the abstract to whet your appetite:

Policy-makers are considering large-scale programs aimed at self-control to improve citizens’ health and wealth and reduce crime. Experimental and economic studies suggest such programs could reap benefits. Yet, is self-control important for the health, wealth, and public safety of the population? Following a cohort of 1,000 children from birth to the age of 32 y, we show that childhood self-control predicts physical health, substance dependence, personal finances, and criminal offending outcomes, following a gradient of self-control. Effects of children’s self-control could be disentangled from their intelligence and social class as well as from mistakes they made as adolescents. In another cohort of 500 sibling-pairs, the sibling with lower self-control had poorer outcomes, despite shared family background. Interventions addressing self-control might reduce a panoply of societal costs, save taxpayers money, and promote prosperity."

Related posts:

Does Exercise Improve Survival After a Cancer Diagnosis? An Encouraging New Study (2024)

Life expectancy can increase by up to 10 years following sustained shifts towards healthier diets in the United Kingdom (2023)

Even Short Runs Have Major Health Benefits (2023)

What if the Most Powerful Way to Live Longer Is Just Exercise? (2023) 

Exercise Helps Blunt the Effects of Covid-19, Study Suggests (2023)

Carry Your Groceries, Take the Stairs: Short, Intense Movement Can Improve Your Health (plus non drug ways to fight diabetes and Covid) (2022)

Almost half of cancer deaths globally are attributable to preventable risk factors, new study suggests (2022)

New research leads to doubt over the extent or even existence of the ego‐depletion effect (the theory of the exhaustible willpower muscle) (2019)

How lifestyle changes can reduce the risk of dementia (2019)

Good health begins with individual decisions (2018)

Nearly half of U.S. cancer deaths blamed on unhealthy behavior (2017)

Regular Exercise: Antidote for Deadly Diseases? (2016)

Wednesday, February 14, 2024

A Special Valentine's Message On Romantic Love

But first some links to related news stories:

The first one is Mwah! Kissing eases stress, study finds. The following quote gives you an idea of what it is all about: "Kissing, it turns out, unleashes chemicals that ease stress hormones in both sexes and encourage bonding in men, though not so much in women." I guess economists call this "interdependent utility functions." Meaning that what brings one person pleasure brings brings the other person pleasure, and vice-versa.

The other is Cocoa Prices Create Chocolate Dilemma. (that is from 2009) The article opens with "Soaring cocoa prices are creating a Valentine's Day dilemma for chocolate makers. They don't want to raise retail prices when recession-weary consumers are trying to limit their spending." The problem is crop diseases in Ivory Coast and Ghana. You might need to be a WSJ subscriber to read the whole article.

Here is a new article from yesterday's San Antonio Express-News (2-13-2011). Romance in bloom at workplace: Survey indicates 59% have taken the risk-filled leap. It seems like many people admit to having a romance at work and/or meeting their spouse at work. So what starts out as economic activity leads to some other needs being met.

Now the economic definition of romantic love.

 Abstract: "Romantic love is characterized by a preoccupation with a deliberately restricted set of perceived characteristics in the love object which are viewed as means to some ideal ends. In the process of selecting the set of perceived characteristics and the process of determining the ideal ends, there is also a systematic failure to assess the accuracy of the perceived characteristics and the feasibility of achieving the ideal ends given the selected set of means and other pre-existing ends.

The study of romantic love can provide insight into the general process of introducing novelty into a system of interacting variables. Novelty, however, is functional only in an open system characterized by uncertainty where the variables have not all been functionally looped and system slacks are readily available to accommodate new things. In a closed system where all the objective functions and variables must be compatible to achieve stability and viability, adjustments in the value of some variables through romantic idealization may be dysfunctional if they represent merely residual responses to the creative combination of the variables in the open sub-system."
The author was K. K. Fung of the Department of Economics, Memphis State University, Memphis. It was from a journal article in 1979. More info on it is at this link. The entire article, which is not too long, can be found at this link.

Then there was this related article: Love really is blind, U.S. study finds. Here is an exerpt:
"Love really is blind, at least when it comes to looking at others, U.S. researchers reported on Tuesday.

College students who reported they were in love were less likely to take careful notice of other attractive men or women, the team at the University of California Los Angeles and dating Web site eHarmony found.

"Feeling love for your romantic partner appears to make everybody else less attractive, and the emotion appears to work in very specific ways in enabling you to push thoughts of that tempting other out of your mind," said Gian Gonzaga of eHarmony, whose study is published in the journal Evolution and Human Behavior.

"It's almost like love puts blinders on people," added Martie Haselton, an associate professor of psychology and communication studies at UCLA."
Here is a Pepper  ... And Salt comic that fits the theme:
More links:

How to Be a Better Valentine, Through Economics by economist Paul Oyer.

Here’s what science says is the secret ingredient to making your love spark 

Can Giving Up Money And Material Things Lead To More Love?

What Do Men In China Need To Get A Bride?

Adam Smith, Marriage Counselor

A Special Valentine's Message On Romantic Love

Can You Put A Price Tag On Love?

Do Opposites Attract? Not Usually, Except Maybe When It Comes To Money

Return of the Love Headhunters

eHarmony To Provide Personal Counselors To Help You Find Mr. Or Ms. Right

Economist Paul Zak, aka Dr. Love (he studies the brain with "neuroeconomics")

This is your brain on love   (brain scans and biology seem to confirm the economic definition given above)

Dollars and Sex: How Economics Influences Sex and Love (book by Marina Adshade).

Do Women Really Value Income over Looks in a Mate? by Marina Adshade

Tuesday, February 13, 2024

The Seasonally Adjusted CPI Was up 0.3% in January

See Consumer Price Index for All Urban Consumers: All Items in U.S. City Average from FRED (Federal Reserve Economic Data) compiled by the Research Division at the Federal Reserve Bank of St. Louis for data on the seasonally adjusted CPI.

That site shows a graph but if you click on the Download button you will get the actual numbers in Microsoft Excel.

The Consumer Price Index for All Urban Consumers: All Items in U.S. City Average (CPIAUCSL) was 309.685 in Jan. after being 308.742 in Dec. Since 309.685/308.742 = 1.003, that means it was up 0.3% in Dec. If we had that every month for 12 months it would be up 3.7%.

It was 300.356 in Jan. 2023. Since 309.685/300.356 = 1.031, that means it was up 3.1% over the last 12 months.

The non-seasonally adjusted CPI was 308.417 in Jan. and 299.170 in Jan. 2023. That was up 3.09%. So pretty close to the seasonally adjusted CPI. This is still above the Fed's target of 2.0% (although they prefer to use the Personal Consumption Expenditures Price Index which 2.6% higher in Dec. 2023 than Dec. 2022).  

For more information, see Prices rose more than expected in January as inflation won’t go away by Jeff Cox of CNBC. Excerpts:

"Inflation rose more than expected in January as stubbornly high shelter prices weighed on consumers, the Labor Department reported Tuesday.

The consumer price index, a broad-based measure of the prices shoppers face for goods and services across the economy, increased 0.3% for the month, the Bureau of Labor Statistics reported. On a 12-month basis, that came out to 3.1%, down from 3.4% in December.

Economists surveyed by Dow Jones had been looking for a monthly increase of 0.2% and an annual gain of 2.9%.

Excluding volatile food and energy prices, the so-called core CPI accelerated 0.4% in January and was up 3.9% from a year ago, unchanged from December. The forecast had been for 0.3% and 3.7%, respectively."

"Generally, the inflation data had been encouraging, even if annual rates remain well above the Fed’s 2% target. Moreover, core inflation, which officials believe is a better guide of long-run trends, has been even more stubborn as housing costs have held higher than anticipated."

The article also discusses what is going up and what is going on. There is a graph of the monthly year-over-year percent change in prices and core prices going back almost 3 years.

Other related links:

Consumer Price Index Data from 1913 to 2023

Personal Consumption Expenditures Price Index 

The Bureau of Labor Statistics makes seasonal adjustments. See Consumer Price Index Summary.

Monday, February 12, 2024

The economic impact of the Super Bowl is met with skepticism from economists

See Las Vegas hopes to hit the jackpot with the Super Bowl by Alicia Wallace of CNN. Excerpts:

"Las Vegas says it expects a “conservative” economic impact of around $600 million, and is looking to cement itself in the rotation for future Super Bowls and other major sports events."

"Otherworldly numbers like $600 million are often met with skepticism from economists, Frank Stephenson included.

“I think you’ll get more money flowing in this weekend than you would, say, a weekend ago or a weekend from now or the same weekend last year,” he said. “But the dramatic numbers that folks like to throw out are, I think, somewhat exaggerated.”

Stephenson is a professor of economics at Berry College in Mount Berry, Georgia, and specializes in sports economics and public policy. In 2021, he published a research paper in the Journal of Sports Economics on how Super Bowls affect tourism in their host city.

Stephenson’s bread-and-butter is analyzing hotel occupancy data to get a sense as to whether the events put more heads in beds than what’s typically seen.

This time of year, Las Vegas is typically one of the highest occupancy cities in the country. Last February, the city averaged a 78.1% occupancy rate, which trailed just a few other cities, he said, citing STR data. And for the week that ended on January 27 of this year, Las Vegas’ occupancy rate was 83.4%, STR data showed.

“Las Vegas has a lot of people going there for Super Bowl weekend anyway,” Stephenson said. “My sense, and this is what I’ve seen in some of the work I’ve done, is that a lot of the visitors that go will simply displace other people who would have been there.”"

"LVCVA Hill agrees. [Steve Hill, chief executive officer and president of the Las Vegas Convention and Visitors Authority]

“We’re basically full when the Super Bowl is in a different city, so it’s not added visitation at any real level,” Hill said."

Related posts:

Does It Pay to Host the Olympics? (2009)

Economic benefits from mega-events like the Olympics are often overstated (2021) 

The San Antonio Spurs And Federal Subsidies (2016) (The Spurs received $41 million in federal subsidies to build the AT&T Center with little economic gain for the community-multiple studies show major private sports stadiums don’t ultimately produce substantial economic growth relative to the government incentives they receive)

As Covid-19 Closes Stadiums, Municipalities Struggle With Billions in Debt (2020) 

Even If You Don't Like Sports, You Might Be Paying For Them (2011)

Sunday, February 11, 2024

You Don’t Have to Be a Jerk to Succeed

Pop-culture icons celebrated for their sheer nastiness may encourage the idea that bad behavior is the path to power. But research shows it’s often the other way around.

By Yascha Mounk. Yascha Mounk is a professor of international affairs at Johns Hopkins University. His most recent book is The Identity Trap: A Story of Ideas and Power in Our Time

Adam Smith's "invisible hand" suggests that if you follow your own self interest, you will promote the interests of society. I have had some posts on this issue of being selfish vs. being altruistic and if they can actually be separated before. So those links are at the end.


"But is the assumption that being a jerk will make you successful actually true?

There’s some reason to think that it may be. Psychologists have found that people who are high in the psychological trait of “disagreeableness” are more likely to enjoy success in certain fields, especially those with a heavy emphasis on creativity. Samuel Hunter of Pennsylvania State University and Lily Cushenbery of Stony Brook University, for example, asked 200 college students to come up with ideas for an online marketing campaign and then work together to select the best ideas. In a 2014 study, they found that the ideas of highly disagreeable students—that is, of people who tend to behave in ways that are “more argumentative, egotistical, aggressive, headstrong and hostile”—were more likely to be selected."

But it is important not to jump to conclusions from a few salient examples. As it turns out, other research suggests that, in most contexts, being disagreeable does not help you to get ahead—and may even be a serious disadvantage.

To rigorously answer the question of whether being a jerk makes people more successful, Cameron Anderson, a professor of organizational behavior at the University of California at Berkeley, decided to run an elaborate test. He measured the personalities of 457 college students and then followed their career trajectory over a period of 14 years. What he found was surprising: Contrary to expectations, disagreeable people were no more successful in pursuing power in the workplace than their more agreeable colleagues.

"disagreeable people did have one apparent advantage: “Disagreeable individuals were intimidating, which would have elevated their power.” But the advantage derived from their domineering behavior was offset by a concomitant disadvantage: “They also had poorer interpersonal relationships at work” and this offset “any possible power advantage their behavior might have provided.”

Anderson’s takeaway was unequivocal: “No matter the individual or the context, disagreeableness did not give people an advantage in the competition for power—even in more cutthroat, ‘dog-eat-dog’ organizational cultures.”"

"nobody wants to be surrounded by egotists with a completely inflated sense of their brilliance. Sometimes, braggadocio may help you get promoted; more often, it will make people do what they can to avoid having to be around you."

"Having power seems to inspire people to engage in selfish behavior. As Dean C. Ludwig of Lourdes University and Clinton O. Longenecker of the University of Toledo showed in a classic study in the Journal of Business Ethics in 1993, successful leaders don’t seem to act like jerks because they are especially immoral or face especially stiff competition. On the contrary, success provides them with privileged access to people and to information; gives them “unrestrained control of organizational resources”; and inflates their sense of invincibility. Their behavior, in other words, is a “by-product of success.”"

"Powerful people can get away with being jerks much more easily. But it does not follow that being a jerk will help to make you powerful."

Related posts:  

The Invisible Hand Increases Trust, Cooperation, and Universal Moral Action   (2022)

Conspicuous Consumption, Conspicuous Virtue, Thorstein Veblen (and Adam Smith, too!) 

Is altruism a result of selfishness? (2017)

Do you have to be selfish to make more money? (2018)

Does collective self-deception mask selfish behavior? (2018)

Why Doing Good Makes It Easier to Be Bad (2019)

The Dalai Lama Says It Is Sometimes OK To Be Selfish (2013)

Why Being Kind Helps You, Too—Especially Now: Research links kindness to a wealth of physical and emotional benefits. And it’s an excellent coping skill for the Covid-19 era (2020)

Adam Smith vs. Bart Simpson (2011) (Relates to Smith's book on sympathy The Theory of Moral Sentiments)

Why being kind to others is good for your health (and that can include donating money) (2020)

The Instinct to Share Our Good Fortune (2023) 

There is a positive relationship between prosociality and labor market success (2021)

Friday, February 09, 2024

When it comes to lifetime earnings, the most important decision appears to be the choice of college major

See Choices and consequences in the real “game of life”: From falling in with “bad apples” to choosing a major, economists decipher how early decisions shape long-term outcomes by Jeff Horwich, Senior Economics Writer for the Federal Reserve Bank of Minneapolis. Excerpt:

"The research on Minnesota students from Nath, Borovičková, and Leibert (discussed above) finds that while high school sorting matters, the most important “decision node” appears to be the choice of college major. The economists look at earnings three years after graduation.

The University of Michigan’s Kevin Stange looks further out, tracing students in the 10 most popular major categories roughly 16 years into the workforce. (“The Returns to College Major Choice: Average and Distributional Effects, Career Trajectories, and Earnings Variability,” with Rodney Andrews, Scott Imberman, and Michael Lovenheim). Using linked education and earnings data from Texas, the economists get a multidimensional view, uncovering how income grows as workers gain experience and how earnings are distributed for workers who had the same major.

The nature of the patterns might not surprise, but the changes over time are striking to see. Liberal arts majors have the lowest earnings at all points and serve as the baseline against which other majors are compared. Recently out of school, engineering majors make more than $22,000 more annually than liberal arts majors (in 2016 dollars; importantly, these findings control for standardized test scores, demographics, and other factors). Ten years later, the gap has grown to more than $32,000. Business and economics majors make a little less than engineers but see similar wage growth. The biggest leaps come for biology and health majors—the effect of doctors who enter the workforce late and earn less as medical residents, but make rapid gains when they enter full practice.

Communications and social science majors, by contrast, do not make much more than liberal arts majors to begin with, and this small premium actually shrinks over time. A decade into the job market, the average communications major makes about $4,000 more annually than liberal arts; the average social science major just $2,600 more.

The within-major distributions are similarly eye-opening; majors vary significantly in how concentrated the earnings are. Earnings for business and economics majors are particularly concentrated among the highest earners. Earnings for engineers, by contrast, rise more evenly along the earnings range. The slightly higher average earnings for social science majors can be attributed largely to the very highest earners in this group; most social science majors actually earn less than liberal arts majors.

The economists also find majors with high returns have more stable earnings over time. In general, said Stange, the results show that choosing the right college major matters more to your earnings than the decision to go to college at all. The research is illuminating at a time “when there is a lot of concern about the value of college, writ large,” Stange said, and “many states are scaling back their investments in certain programs based on what investments are going to pay off in the labor market.”"

See also 33 of the Highest-Paying Majors You Can Choose in College (2022). 

The last two items in the list below suggest that simply finishing college has value in terms of signalling to employers what your traits are and in developing cognitive endurance.

Related posts: 

Studying Economics Increases Wages a Lot (2020)

What College Majors Pay The Highest? (2013)

50 College Majors With the Best Return on Investment (2015)

Will Studying Economics Make You Rich? A Regression Discontinuity Analysis of the Returns to College Major  (2023)

Why do employers pay extra money to people who study a bunch of subjects in college that they don’t actually need you to know? Signaling (2020)

Cognitive Endurance as Human Capital (2022)

Wednesday, February 07, 2024

How much shrinkflation is out there?

Allysia Finley of The WSJ wrote a recent article saying it was everywhere. But about a year ago I posted something about research by the Bureau of Labor Statistics that shows that it does not make much impact on the CPI. 

First there will be excerpts from Finley's article then the post from last year.

See ‘Shrinkflation’ Is in the Air, Online and Everywhere Else: You pay more for ‘extras’ that used to be part of the base price. The CPI doesn’t measure that. Excerpts:

"Shrinkflation, paying the same price for noticeably smaller quantities of the same thing, isn’t appearing only in the grocery aisle. It’s everywhere. Americans may be paying around the same prices as they did a year ago, but they are often getting less.

Take airline fares, which the Labor Department’s consumer-price index shows fell 9.4% during 2023. That sounds nice, until you consider that the calculation heavily weighs the “lowest available fare” for a trip—typically offered by budget airlines, which require customers to pay more to bring a carry-on and select a seat in basic economy. Flyers also get less legroom and a charge for beverages or snacks.

Budget airlines have been slashing their fares to attract more customers, though legacy carriers have also increasingly unbundled their prices to compete. That’s why you’ll have to pay $50 extra if you don’t want to be assigned seat 32B, plus $30 more for a carry-on. Some Americans may like differentiated prices, but most don’t like paying more for the same services they used to get as part of the ticket cost."

"Consider video streaming services, most of which have been losing money. Several increased prices last fall by around 20%. Disney+’s ad-free service rose from $11 a month to $14. Yet the CPI shows that prices for video subscription services have risen a mere 2% over the last year. How can that be?

Streaming services have recently introduced lower-cost plans with ads. If you don’t want to pay more, you will have to suffer through commercials. Shrinkflation has even come for your Amazon Prime account. The company on Jan. 29 began charging an extra $2.99 a month—or $35.88 a year, a 20% premium over a standard Prime subscription—to stream movies and TV shows without ads."

"Why does the CPI show that health-insurance prices dropped 27.1% since December 2022? The Labor Department calculates health-insurance inflation using a convoluted method that relies on retained insurer earnings as a proxy for prices.

Again, inflation numbers don’t tell the full story. As another example, the Federal Reserve’s preferred inflation gauge—the personal consumption expenditures index—takes into account so-called substitution effects. But when you buy chicken because you can’t afford beef, you’re still suffering the effect of inflation."

Now the post from last year How does the Bureau of Labor Statistics account for shrinkflation in calculating the Consumer Price Index?

See Getting less for the same price? Explore how the CPI measures “shrinkflation” and its impact on inflation by Kari McNair of the BLS. Excerpts:

"You may have noticed recently that you’re going through a roll of paper towels at a faster clip or that there seem to be fewer tortilla chips in the bag. This isn’t your imagination! The concept is known as downsizing or shrinkflation. (We will use the term downsizing in this article.) As input costs increase and costs to create a product rise, companies can increase the list price of a good or they can offer a smaller amount of the product for the same price. So, a candy bar’s size might change from 1.6 ounces to 1.5 ounces, yet the price stays the same. In other words, the price per unit the consumer pays increases as the amount they purchase decreases, while the price they pay at the register remains the same."

"Given how easy it is to miss downsizing when you are shopping, you might be wondering if the CPI is able to reflect these types of price changes accurately. The CPI strives to capture the price change caused by downsizing through accurate data collection and effective price calculations. Our data collectors and economists identify changes to the goods and services used to calculate the CPI. Data collectors collect prices for the same unique set of goods and services over time. This includes identifying, verifying, and notifying each other of product size changes so the effective price change experienced by consumers can be accurately reflected in the CPI. When an item goes through downsizing or upsizing, the data collector reports the new data, updates the product description, and sends a message to economists in the national program office noting the product size change. Data collectors do not record information such as the number of chocolate chips in a cookie or the number of pepperonis on a pizza, however, they do record attributes such as weight and volume.

Our economists continuously review goods and services in the CPI. They identify product downsizing through monthly reviews of CPI data and online research. For products data collectors identify with a size or weight change, economists will conduct further research on the manufacturers’ websites, online shopping websites, and other sources to verify if the product is experiencing product downsizing or upsizing. Once the economist has verified that the item is experiencing product size change, they will notate the item and search the CPI sample for the same item. To ensure downsizing is captured in a timely manner, the economist will notify the data collectors that a product is experiencing downsizing so that they can be on the lookout for a size change.

Data collection procedures vary for different products and services; therefore, the impact of product size change is handled differently based on the item. An effective price per standard size, usually a price per ounce, is calculated for items where size is reported. The effective price per ounce is the collected price divided by size. For example, if a half-gallon (64 oz) of Brand A vanilla ice cream is priced in January 2021 at $5.99, then the effective price per ounce is $5.99 divided by 64 oz or $0.093 per ounce. If, in February 2021, the same Brand A vanilla ice cream is reduced in size to 60 oz, but the price is still $5.99, the effective price per ounce would be $0.0998 per ounce. This results in a 6.7-percent increase in the price per ounce of the ice cream, and the CPI would include this price increase. Our economists even adjust for items that do not have a weight, like toilet paper. For example, when the number of sheets per toilet paper roll changes from 220 per roll to 200, the economist will adjust the data to show a 10-percent price-per-sheet increase.

CPI economists track identified downsizing and upsizing in the CPI sample each month."

"product size changes (upsizing and downsizing) increased the CPI all commodity and services index by 0.01 percent per year."

"the impact of product downsizing at the all commodity and services level is minimal, with an average annual effect of 0.01 percent per year, so while consumers may notice shrinkflation at the grocery store, it has a very small impact the overall inflation picture they face."