Thursday, February 09, 2006

Valentine's Day Economics

To stay with the same theme, what about interesting economic effects of Valentine's Day?

Stay away from the obvious: increased demand for flowers and chocolates, etc. The more creative the economic effect, the better.

Groundhog Day

So last week was Groundhog Day, which of course only reminds me of the Bill Murray movie from awhile back where he wakes up and every day is the same -- he keeps reliving Groundhog Day over and over again.

So to throw out an irrelevant, abstract though experiment, what do you think the economic effects would be if the world was stuck in a Groundhog Day (instead of just the Bill Murray character in the movie)? Keep in mind that everything resets when you wake up the morning to exactly what it was like when you woke up the day before.

You're so ugly it's criminal

A new paper from the National Bureau of Economic Research finds that, controlling for other factors, people that are ugly are more likely to commit crimes. The paper is called, simply enough, "Ugly Criminals," and below is the abstract:
Using data from three waves of Add Health we find that being very attractive reduces a young adult's (ages 18-26) propensity for criminal activity and being unattractive increases it for a number of crimes, ranging from burglary to selling drugs. A variety of tests demonstrate that this result is not because beauty is acting as a proxy for socio-economic status. Being very attractive is also positively associated adult vocabulary test scores, which suggests the possibility that beauty may have an impact on human capital formation. We demonstrate that, especially for females, holding constant current beauty, high school beauty (pre-labor market beauty) has a separate impact on crime, and that high school beauty is correlated with variables that gauge various aspects of high school experience, such as GPA, suspension or having being expelled from school, and problems with teachers. These results suggest two handicaps faced by unattractive individuals. First, a labor market penalty provides a direct incentive for unattractive individuals toward criminal activity. Second, the level of beauty in high school has an effect on criminal propensity 7-8 years later, which seems to be due to the impact of the level of beauty in high school on human capital formation, although this second avenue seems to be effective for females only.
And yes, this is economics.

Any ideas of why this might be? Remember that the authors establish that it is not because rich people are less likely to be ugly.

(Source: Marginal Revolution)

Wednesday, February 08, 2006

The Nuclear Threat of Iran

A current issue in the news is the concern over the nuclear program in Iran. There are fears that if Iran obtains (or seriously attempts to obtain) nuclear weapons the situation would become a new Iraq or that the nuclear technology would be given to terrorists by the Iranians or that Iran would use the nuclear weapons on the US or Israel.

This issue of course has relevance to economics through the application of game theory. This first article is a post by Tyler Cowen that discusses his relative optimism that nuclear weapons would not be used if obtained by Iran. This article is by Thomas Schelling, who as you remember, won this past year's Nobel prize in part for his work on the application of game theory to nuclear deterrence. Each article remains optimistic about the situation using past evidence of nuclear weapons not being used, particularly with Israel, India, and Pakistan.

Both articles are very interesting and give a further example of the application of economic thinking to current important problems.

Monday, February 06, 2006

Controversial Foreign Aid

From an economics blog called
In Kenya, four million people are facing hunger due to severe drought. A New Zealand dog food manufacturer offered to donate 6,000 emergency packs of dog food mixture to help feed Kenyan orphans. A Kenyan government spokesman said: "We appreciate the offer, but we dismiss it as culturally insulting."
Their source is the following BBC article.

I imagine this article will garner some divided views from you guys, so what do you think? Is cultural pride interfering with social welfare or is it worth sacrificing a relatively small amount of food to maintain the dignity of their people?

(Source: Marginal Revolution)