100 Economics Question of the Day: An Intermittent Blog

Saturday, October 04, 2008

Is Warren Buffet the 2008 version of 1907's J. P. Morgan?

The only reason not to answer "yes" seems to be whether there are other Great Financiers of the Day.

posted by Ken Houghton at 13:25 0 comments links to this post

Sunday, September 14, 2008

IF values must be GE 0, how do we account for extinctions?

Economists tend to assume an ordered set of preferences, and holdings in all securities /commodities to reflect that.

To make the math work, the standard assumption is that the holdings are >=0. This includes the assumptions of Arrow-Debreu, which is the model usually used to bash Stern supporters.

That is, in most cases, you hold zero of a specific stock or commodity by choice.

I live diving. I like coral reefs. If I read the Stern Report correctly—or even just heard Sir Nicholas's presentation at January's AEA meeting correctly—the coral reefs are not going to be around within 50 years.

The obvious conclusion is that someone placed a negative value on coral reefs.

But this contradicts the model, which requires x.GE.0.

So how do we explain extinction (a real phenomenon, and one not to be confused with "creative destruction") in economic modeling?

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posted by Ken Houghton at 23:17 0 comments links to this post

Tuesday, April 29, 2008

Two Questions on Economic Growth in Developing Countries

  1. If the prescription for open markets and universal trade used by many of the "Washington Consensus" is accurate, can someone please cite two examples (I'd probably settle for one, but it would have to be a Really Good One) of companies that have made the transition using that method?
  2. Relatedly, how is a country supposed to develop a Competitive Advantage in such a scenario?

Cross-posted at Marginal Utility.

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posted by Ken Houghton at 10:07 0 comments links to this post

Saturday, December 09, 2006

Question of the Fundament

Given that no corporation in its right management would ever attempt to maximize GDP, why do economists believe that GDP is an appropriate benchmark for a society?

(Cross-posted at Snark of the Day, but rather a serious question if you think about it.)

posted by Ken Houghton at 18:48 2 comments links to this post

Saturday, October 28, 2006

A Footnote for the Ages

With a hat tip to Greg Mankiw via David Friedman, comes this from Todd Kendall's "Pornography, Rape, and the Internet" (PDF):
35 On the other hand, as discussed earlier, more dating also means more opportunities for date rape.

posted by Ken Houghton at 13:11 0 comments links to this post

Monday, October 16, 2006

If We Were All Rational, would everyone be speeding?

Thought-experiment: assume that all cars work perfectly, that law enforcement is not absolute, and that people are strictly rational. Would not one then conclude that the optimum speed i at which one should drive, given p(x) as the probability of receiving a ticket for speeding and s(x) is the level of the speeding fine, is:



Given that p(x) at i=56 <> 1, no rational driver would drive at or below the speed limit.

The proximate reason for this thought is the exchange between Mark Pauly and Kenneth Arrow on the matter of "moral hazard," in which both appear to conclude that social stigma alone are not a matter of governance.

posted by Ken Houghton at 23:27 1 comments links to this post

Saturday, September 09, 2006

Out of Context Quote, Small Sample Size

"Rapid price changes lead to economic inefficiency." - Samuelson and Nordhaus, 16th ed., p. 373

TOS currently: $139.99 (though I believe it's $44.99 per season in the stores).

Original pricing from late 2004:

Season 1: $106.99
Season 2: $106.99
Season 3: $ 99.99

Memory serving, the set was offered last Xmas for around $270. Best Buy now lists it for $179.99.

Does this count as deflation?

By the way, the best Star Trek series is coming out for Thanksgiving.

(Cross-posted to Marginal Utility)

posted by Ken Houghton at 18:41 0 comments links to this post

The Times Drinks Habitat's Kool-Aid—Still...

The letter from Peter Ostrower praising the efforts of his organization, Habitat for Humanity, in the rebuilding of New Orleans is revelatory.

(To be clear: I gave regularly to Habitat until they shifted their literature to emphasize that they are a "Christian" organization, at which point I shifted to other organizations. I still admire the work they do and their publicity skills.)

Mr. Ostrower declares his group "the city's largest organized rebuilding effort." How much rebuilding?
Habitat has handed over the keys to more than 30 houses this summer and plans to complete 100 homes this year.

Cool. At that pace, it would only take 300 years to rebuild the city. Ostrower continued:
Habitat's goal of 1,500 new houses by 2011 creates a significant demand for volunteer labor. Although our current progress may seem like a modest first step, it's an energetic start.

So, if they get the "volunteer labor," Habitat would be able to build an average of either 280 (if he means 2007-2011, inclusive) or 350 (if he means 2007-2010) houses a year. Which would have the city almost rebuilt around the end of this century.

Don't get me wrong; to re-emphasize, I support the effort of Habitat for Humanity in spirit (the rest of you can send cash). But their capacity and "energetic start" isn't anywhere near what would be needed.

Tell me again, please, why we should believe that private charities are any more efficient or effective than government support and funding?

(Cross-posted at Marginal Utility)

posted by Ken Houghton at 18:07 0 comments links to this post