Friday, September 15, 2006

Reading a Book vs. Watching a DVD

Economist Tyler Cowen offers what I think is a very interesting question:

I almost always read novels in bits. That is, I put the book down for a few times before finishing it.

I rarely watch movies in bits. That just seems wrong. But, assuming we are watching on DVD, why? Why do pauses ruin a movie but not a book?

He offers several hypotheses, but the one I find most convincing initially is:
2. Most books are longer than most movies, but there is otherwise no good reason for the difference in our consumption pattern.
I find this one convincing simply because if there is a book that takes less than two hours to read, I usually read it in one sitting. I tend to think that any movie over 1 hour and 45 minutes is too long, anyway, so I have no problem pausing DVDs and watching the rest later if they are over 2 hours.

Another reason I would add:
  • with books, it is easier to look back at an earlier section for a piece of information if your forget, even with the scene selection on DVDs
A further wrinkle he offers is comparing action books and action movies:
The ever-wise Natasha notes that we are mostly likely to read action novels -- such as The da Vinci Code -- straight through without pause. But action movies are the easiest to watch in bits. Ever try just a half hour of Jackie Chan? Wonderful. But breaking up a good drama is criminal.
What are your thoughts on this?

(Source: Marginal Revolution)

Wednesday, September 13, 2006

Banning Chocolate from Schools

Economist Tim Harford discusses how free markets are suppressed in some cases. The main issue he discusses is how some schools are banning candy in vending machines. The questions to go along with the article are below:

In a few very publicized cases, the government is trying to get directly involved in maintaining (or improving) the health of America's children by putting weight on report cards, removing vending machines from schools, etc. Is it important to do such things, or is it a lost cause? If so, why, and what causes the problem in the first place (like marketing of junk food directly to children)? And is there something, ultimately, that could reduce the incentive for children (and people in general) to eat junk food, or is the approach that these schools are taking (by removing the temptation entirely) the best (or is it an impossible problem to fix at all)?

(Proposed by Nicole)

Divergence Between Test Scores & Economic Performance

Nobel Prize winning Economist Gary Becker has an article posted on the following paradox:
One of the challenging paradoxes during the past several decades is that American teenagers have consistently performed below average on international tests in math and sciences, and not especially well on reading tests, yet the American economy is more productive than any other.
One reason he gives is that the education system in the United States builds up and gets harder as you move up each level, culminating with university, while in some other countries, elementary and secondary school is harder and college is seen as a "break" or a reward for doing all of the work in the first place. I can attest to this phenomenon from observing schools and talking to students in Japan. Another interesting reason he gives that I can relate to as a teacher is that:
American schools are less oriented toward rote teaching than are schools in many other countries, and they are more oriented toward giving students practice in thinking through issues and expressing themselves in discussions.
Economist Arnold Kling boils the argument down to two propositions:

(1) International tests fail to measure the superior aspects of the U.S. education system.

(2) Education is not such an important factor in comparative economic performance.

I lean toward (2). It's better to have strong entrepreneurialism and mediocre education than the other way around.

Which explanation do you find most convincing? Any other explanations that may be useful?

(Source: EconLog)

Consumer Surplus from Pets

Economist Tyler Cowen has a post on how much consumer surplus people get from pets -- very timely considering what we are studying right now.

He argues that people get a lot of consumer surplus from pets because they value the pets they have very highly, but many families do not want another. Therefore, the willingness to pay for the pet they already have is relative to the price they would have to pay for the next pet (which is determined by their willingness to pay for that next pet).

He goes on in the post to discuss endowment effects and the corresponding rise in living standards, but for this post, let's stick to his idea that people get a lot of consumer surplus out of their pets. Any thoughts in agreement or disagreement?

(Source: Marginal Revolution)

Tuesday, September 12, 2006

People Sleep Better on a Pile of Money

An interesting study from the Journal of American Epidemiology suggests that the rich sleep more efficiently. People with higher incomes don't sleep for more hours necessarily, but they spend less time trying to get to sleep each night (called sleep latency).

Here is a link to a graphic from the study and where I originally found out about it.

Any ideas on what your income could have to do with your sleep latency?

(Source: Marginal Revolution)

Monday, September 11, 2006

Copyrights for Fashions?

Economist Greg Mankiw points to an article in the Wall Street Journal that explains a way that designers want to stop cheap imitations of their designs:
prominent fashion designers in the U.S. are pushing for federal legislation that would offer three years of copyright-like protection for designs ranging from dresses and shoes to belts and eyeglass frames.
What do you think of this idea? Copyrights protect intellectual property and give people more incentive to create new ideas. However, they also create temporary monopolies and drive up the price of the goods in question. Copyrights already cover written material, songs, etc. Do you think copyrights should be extended to fashions?

(Source: Greg Mankiw's Blog)

Using Economics to Put People in Jail

The Economics Focus in this week's issue of The Economist discusses how the "efficient markets hypothesis" is used in legal cases. Again, we are getting a little ahead of ourselves in the curriculum, but the "efficient markets hypothesis," as applied to the stock market, basically says that the price of a stock includes all of the public information relevant to its value. Therefore, the only reason a stock changes price is because of new information.

You can turn the hypothesis around and measure how much impact an event has on the stock price by determining how much the stock went up or down when the news came out about the event. This hypothesis was used in the legal case of a tax accountant named James Olis
His 24-year sentence stemmed from a calculation of the financial loss caused to investors in Dynegy by Project Alpha, an accounting fraud in which he took part. That financial loss was estimated using the fall in Dynegy's share price on the news that Project Alpha was fraudulent. According to Judge Lake, it was so big that, under sentencing guidelines then in place, Mr Olis had to go to jail for a long time.
Any thoughts on the use of this theory to determine damages? The article discusses some of the controversy of using it.

(Source: Freakonomics Blog)

How to Best Target Foreign Aid

Foreign aid to developing nations has typically been used to fund long-term projects like infrastructure (roads, education systems, etc.). An article in Business Week from Edward Miguel says that it should be used instead to repair the short-term effects of natural catastrophes:

Our research find that a 5% drop in per capita income due to drought increases the likelihod of a civil conflict [in African countries] in the following year by nearly one half. That's a very large effect.

...Currently, most foreign aid focuses on long-term investments in infrastructure of education but does little to deal with such short-term triggers of violence as drought or falling export commodity prices. But our research suggests a larger share of aid should aim to dampen the sharp falls in income that actually generate recruits for rebel movements.

There is no link to the article, but here is a link to the Marginal Revolution post that cited it and also an opinion from economist Tyler Cowen that his issue is that he does not think the foreign aid would end up in the hands of the poor in these cases.

(Source: Marginal Revolution)

Sunday, September 10, 2006

How does YouTube make money?

The Economist has an article about the business model of YouTube. The key question is how the site makes money out of people posting amateur videos (which costs a lot in terms of bandwidth and data storage). The main answer is that they don't really have a way of making money yet. Here are their two ideas right now:
Aware that inserting advertisements at the beginning of video clips, as some sites do, is annoying and risks driving away YouTube's users, Mr Hurley and Mr Chen have announced two experiments with advertising, with the promise of more to come. One idea is for “brand channels” in which corporate customers create pages for their own promotional clips. Warner Brothers Records, a music label, led the way, setting up a page to promote a new album by Paris Hilton. The second experiment is “participatory video ads”, whereby advertisements can be uploaded and then rated, shared and tagged just like amateur clips. This “encourages engagement and participation,” the company declares.
Do you think YouTube is a sustainable business? Any thoughts about their ideas on how to make money? I know that many of you are the prime consumers of YouTube, so would you look at ads in this way?

(Source: Newmark's Door)