Marginal Revolution

Tuna fish query

Shaun, a loyal MR reader, asks:

I have something that is bugging me: I have noticed that the small tuna fish cans are cheaper, by the ounce, than the larger ones. This holds true with every brand and supermarket. This seems very counterintuitive to me; nearly every other food product gets cheaper as the quantity increases. I wondered if you could tell me what's going on here.

Could it be storage and spoilage costs, thereby making this the corollary of the vending machine question?  Or is it price discrimination against families and in favor of single people?  Or do single people never finish the can and thus they need a lower price as compensation, noting that you still have to cite storage costs to prevent arbitrage?  Those are my quick reactions, can you do better?

Franco Purini on Tokyo

The minute and the colossal follow one another and clash in a powerful energetic flow that knows no rest, while tangled strips of infrastructure wind between buildings in spectacular spatial combinations.  All is bathed in a hazy, dim light, which rarely brightens, and permeates every interstice of the city, from window to window, sign to sign and corner to corner.  At night, artificial lighting transforms Tokyo into a fantastical apparition of artificial mountain ranges that glow like braziers.  The visual trauma is due to Tokyo giving no sense of any recognizable structure.  Compare with Europe, or the West in general, where cities still have a perceptive -- albeit residual and fragmentary -- urban form which is always based on a more or less rational order, in Tokyo you find a randomness in which every urban rule is overturned or negated.  Or at least so it seems.  As a matter of face, once initial impressions have been overcome, you begin to notice the presence of recurring threads in the urban fabric, first on a subliminal level, than more consciously; a fabric made of multiple, fractal agglomerates of settlements.  These agglomerates are groups in self-similar masses, suggesting urban spaces which are not defined by clearly scaled hierarchies or distinct morphological types.  Here, urban spatiality seems to feature the unplanned coexistence of architectural units and the incidental contiguity or what is small and large, simple immaterial -- rhythm beats over everything, constituting an amazing unifying element in its almost hypnotic repetition of the same model.  In this sense you discover that in the end Tokyo is a simple city that is different from European and American cities only because urban planning is practically absent.  If the former are cities of space, governed by the laws of perspective, then Tokyo is a city of situations...in Asia's greatest city you are completely disoriented from the start. 

That is in a good book called Tokyo: City and Architecture.  I am struck by how much the Tokyo Metro and underground corridors are in fact the defining parts of the city and the most memorable destinations.

Assorted links

1. Own-to-rent: not a good idea

2. More scoop on Romergate

3. The Transparent Society, ten years later

4. Blogging as therapy

5. Why might academics be less happy?

Print Your Own

Need Money?  Print your own here.

Hat tip to Kottke.

Why Popcorn Costs So Much at The Movies

That's the title of the new microeconomics book by Richard McKenzie.  Here is a book trailer on YouTube.  The subtitle is: "And Other Pricing Puzzles."

I am a fan of this book and I wrote a blurb for it.  It is popular economics but it is more extended microeconomic reasoning than most of the other popular economics books.

Donald C, Lavoie, intellectual father of the econoblogosphere

Don Lavoie taught at GMU many years before he passed away in 2001.  Most of Don's work was in comparative systems and central planning, but in the early to mid 90s he spent a few years investigating hypertext.  Don claimed that someday economics would be written in linkable, annotatable form, rather than on paper.  Economics, in his Gadamer-drenched view, would become one big giant conversation rather than a series of isolated papers.  Here is one snippet of his views.  For a few years he talking about the idea non-stop.

At the time I thought he was crazy.

The glasses-cleaning machine

The problem with cleaning your glasses is that the drying action can create new smudge.  So the Japanese have invented a machine to address this problem.  The contraption has two pools of whirring water, at different temperatures.  First you dip your glasses into the vibrating pool of warmer water, where some kind of steam action takes place as well.  Afterwards you dip your glasses into the cooler pool of water, which finishes the action and removes the effect of the steam.

I've never ever had my glasses so clean before.  I found the glasses-cleaning machine, not surprisingly, in one of the underground passageways near Shinjuku.

How to find new books to read

TLV, a loyal MR reader, asks:

I've always been curious about how Tyler goes about choosing new books to read. Most people rely on recommendations from others, but Tyler seems like someone who generates a lot of recommendations rather than relying on them. What is your process?

Children, do not try this at home, but here goes: visit Borders every Tuesday to look for new books, go to a local public library every other day and scan the new books section, subscribe to TLS, London Review of Books, New York Review of Books, noting that you should spend more time with the ads than the book reviews, read the blogs Bookslut and Literary Saloon, read the new magazine BookMark (recommended), read the NYT, FT, and Guardian and their books sections, review lots of books on your blog and peruse the numerous review copies you get in the mail (thanks, you mailers and yes I do look at each and every one; keep them coming!). 

It's rare that I rely on recommendations from other people.

Oh, yes, you should get free shipping on Amazon.com.

Price controls by any other name

Mom-and-pop service stations are running into a problem as gasoline marches toward $4 a gallon: Thousands of old-fashioned pumps can't register more than $3.99 on their spinning mechanical dials.

The pumps, throwbacks to a bygone era on the American road, are difficult and expensive to upgrade, and replacing them is often out of the question for station owners who are still just scraping by.

Many of the same pumps can only count up to $99.99 for the total sale, preventing owners of some SUVs, vans, trucks and tractor-trailers to fill their tanks all the way.

As many as 8,500 of the nation's 170,000 service stations have old-style meters that need to be fixed — about 17,000 individual pumps, said Bob Renkes, executive vice president of the Petroleum Equipment Institute of Tulsa, Okla.

Here is the full story, thanks to William Griffiths for the pointer.

Taken to the Cleaners, Again

A tariff on imports of coat hangers from China is raising dry cleaning costs.  The Aplia Econ blog runs the numbers:

Advocates of trade restrictions often argue that protection will save jobs. Since we can observe price and cost increases associated with trade restrictions, we can estimate how much it costs to save each job in a protected industry. According to the NPR story, there are roughly 30,000 dry cleaners in the U.S., and on average, each pays an additional $4,000 per year due to the hanger tariff. This indicates an average annual cost of 30,000 firms x $4,000 per firm = $120 million. According to the U.S. International Trade Commission's report, U.S. employment in wire hanger manufacturing was 564 workers in 2004 and fell to 236 workers by 2006. Let's assume that employment in this sector would have fallen to zero in the absence of the tariff, and that with the tariff, employment will recover to 2004 levels. In other words, assume the tariff "saves" 564 jobs. Dividing the cost of the tariff to U.S. dry cleaners ($120 million year) by the number of jobs saved (564 jobs) indicates that each job saved costs about $212,765 per year. Keep in mind that the typical full-time worker in this sector earns about $30,000 per year. Even if we assume that industry employment doubles, the cost of the tariff is still roughly $120,000 per job.

Not From the Onion

FTC Wants to Know What Big Brother Knows About You

That's the headline for a story in today's Washington Post (about government regulation of internet advertising).  I suspect the irony was lost on the editors or perhaps this is an Orwellian attempt to twist language.

Addendum: The irony was not lost on the ever-wise Arnold Kling.

Japanese retailing is more efficient than most people think

Kyoji Fukao, professor at Hitotsubashi University's Economic Research Institute, thinks so too. The team he heads provides much of the Japanese data that go into international comparisons. He argues that the usual measures of service sector efficiency - value added per man hour and total factor productivity, which incorporates capital and labour inputs - are crude and hard to compare across borders.

He cites Japan's retail sector, regularly branded as inefficient. The basic measure of retail-sector productivity is how much of a product an employee can shift in an hour. On this measure, Germany does well. That turns out to be because of restricted opening hours, which oblige customers to make hefty purchases in one go. Japan does badly. Cavernous US superstores do better than cramped noodle or tofu shops. Japan also has a dense network of convenience stores on almost every city block, open 24 hours, allowing people to shop whenever they want. This makes them inefficient, since purchases are less concentrated.

No allowance is made, either, for the fact that Japanese shops tend to be within walking or, at most, cycling distance. Figures do not capture the inconvenience of having to travel, or the externalities associated with long shopping expeditions: traffic accidents, pollution, road maintenance.

Here is the full article, interesting throughout.  The quality of Japanese service, by the way, is miles ahead of anywhere else (though stores don't like to take returns) and those subjective pleasures of the shopping experience don't get picked up by the numbers either.  I can't imagine how a Japanese would feel moving to Germany or Austria.

Why are books so outrageously expensive in Brazil?

That's from a reader request.  I'm no expert on Brazil, but here are a few possibilities:

1. Most Brazilians do not read.  I don't mean they can't read, I mean they don't read for leisure so much.  I was stuck at the Sao Paulo airport for seven hours and did not see a single person reading a book, not once.

Taking that as given, low demand means high prices.  That's why Stephen King paperbacks are cheap and Edward Elgar (the name of an academic publisher) tomes go for $100 and up.

2. Brazilian retailing is not in every way efficient.  Efficient retailing in the traditional sense is, by the way, bad for the quality of your food because it means it is easy to serve large numbers.  And Brazil has some of the world's best food, and so inefficient retailing for its books.

3. No other supply source is right nearby and the Portuguese language does not produce an extremely thick market.  Note that the Portuguese of Portugal is very different from the Portuguese of Brazil.

4. The Brazilian currency may be overvalued at the moment, at least in purchasing power parity terms, due to Brazil's commodity exports.

The secret to a happy marriage

This article is poorly written but it does in fact present the secret to a happy marriage: "Be annoying."

The pointer is from Craig Newmark.

Suzuki House

Measuring Up

The subtitle of this excellent book, by Daniel Koretz, is What Educational Testing Really Tells Us.  Here is one excerpt:

The distressingly large achievement differences among racial/ethnic groups and socioeconomic groups in the United States lead many people to assume that American students must vary more in educational performance than others.  Some observers have even said that the horse race -- simple comparisons of mean scores among countries -- is misleading for this reason.  The international studies address this question, albeit with one caveat: the estimation of variability in the international surveys is much weaker than the estimation of averages.

...We are limited to more general conclusions, along the lines of "the standard deviations in the United States and Japan are quite similar."  Which they are.  In fact, the variability of student performance is fairly similar across most countries, regardless of size, culture, economic development, and average student performance.

I was shocked to read this but the book is highly reputable and persuasive.

Neat business card designs

Check them out.

Right now I'm sitting in a country ryokan, listening to a very serious old man play the harmonium for a group of appreciative Japanese senior citizens, all dressed in kimonos, all next to a very large stuffed deer.

How happy is Iceland?

Highest birth rate in Europe + highest divorce rate + highest percentage of women working outside the home = the best country in the world in which to live...Iceland, the block of sub-Arctic lava to which these statistics apply, tops the latest table of the United Nations Development Programme's (UNDP) Human Development Index rankings, meaning that as a society and as an economy - in terms of wealth, health and education - they are champions of the world.

Here is much more, interesting throughout, and I have been an admirer since I visited the country in the mid 1990s.  The author emphasizes that Icelandic women have kids when they want to, often at young ages, and they accept that the father may not be around much but the whole family steps in to help out.

I was wondering whether the proclivity of Icelanders to leave their country (many are highly educated and speak fluent English and thus pursue opportunities elsewhere) somehow counts against these happiness claims.  But oddly I think not.  In part it is their intelligence and balance that makes them want to explore other locales.  In percentage terms, hardly any Japanese leave Japan but this counts against the happiness of the country rather than for it.  Country-specific capabilities can in the long run be stunting or reflect stuntedness.

I've not yet thought through what this means for the economists' tendency to use revealed preference as a measure of value.  There are perhaps two margins of rejecting: the people who are not very good at enjoying something or not able to enjoy it because it is bad, and the people who are very good at enjoying something wonderful and thus wish to build upon that strength and move on to something else.

It is perhaps a Buddhist idea to suggest that the happiest country in the world is a totally empty one.

Pointers are from Seth Roberts and Nadav Manham.

Had I mentioned...?

That Tokyo is the best food city in the world?  That's by an order of magnitude; Paris and others aren't close.  At this point my best guess is that Osaka is number two. 

I thank Yan Li for the pointer to the link, which is interesting on another topic as well.  We visited a quite amazing toilet shop here, which was impressive most of all for its seriousness, not just for its product.  It was I believe on the 26th floor (L-Building, Shinjuku), so there is no walk-in trade for them.  They play stormy Beethoven and offer talking toilets, toilets that perform lab tests on your ****, and toilets that can be programmed to do things I hadn't even thought of before.

Economists Know the Price of Everything

In other disciplines to leave your university because another offers to pay you more entails personal humiliation and status degradation to a not inconsiderable degree: you are supposed to value ideas and colleagues and students, not cash. In economics, however, the thrust of the discipline makes a failure to respond to market forces a moral fault in itself.

Brad DeLong explaining why public universities are having an especially difficult time hiring and keeping economists now that the privates are boosting salaries to a tremendous degree.  Experience at GMU is consistent.  See David Warsh (here and here) for the backstory.   

The economics of vending machines

Japan has so many, but why?  You can cite love of gadgets, etc. but I want something more general.  After all, Japanese retailing has a very high ratio of small stores serving a local clientele; surely Japanese vending machines are another example -- albeit an extreme one -- of that more general trend.

First we must look to the shortage of storage space in homes.  I suspect few Japanese want to buy big piles of stuff at Costco.  So buy smaller "portions" and in the meantime the inventories are stored in the vending machines, where they are more or less at your disposal. 

Cars of course are another means of storage and also a way to transport goods in bulk (NB: you carless people have a hard time pigging out at the public library, you poor souls).  But most Tokyo residents don't use cars so again they buy goods in smaller numbers which again points us to the vending machine.  Buy one disgusting sweet fizzy juice, drink it on the spot, and walk to your nearest vending machine when you need another one.

You'll notice that vending machines are especially popular for canned and bottled liquids, where the ratio of storage and carry costs to per unit value is relatively high.

This article associates vending machines with the nomadic lifestyle.

The "afternoon effect" for artworks

One resilient puzzle identified in the literature is the “declining price anomaly.” This effect was identified by Ashenfelter (1989) and is an obvious repudiation of the law of one price. It refers to the observation that as an auction proceeds, the prices of the lots decline, even for identical goods (e.g., wines). Beggs and Graddy (1997) established the existence of the “declining price anomaly” for heterogeneous goods using data for Contemporary and Impressionist art auctions. This has generated great interest and a number of papers now report somewhat conflicting results in this respect, although the majority still seems to find evidence in favor of this anomaly (see Ashenfelter and Graddy 2003, and Ginsburgh and van Ours 2007.) In light of this controversy, it is of interest to investigate whether or not Latin American art auctions are also subject to the declining price anomaly or the so-called “afternoon effect” (“morning after effect” would be a more appropriate name in this context as Latin Art auctions occur in two parts, the first starting late in the day, say 7pm, and the second starting earlier the following day, usually 10am.) In line with previous research (Beggs and Graddy 1997), we find strong evidence that the “declining price anomaly” holds for Latin Art data, even after controlling for auction and artist unobserved characteristics (dummies) and a huge array of paintings characteristics, including reputation and provenance.

Here is the link and yes I do believe this is true.  I believe it is mostly neuroeconomics at work, namely that we are more excited by new offerings than by familiar offerings.  Similarly, a painting that has been "shopped around" usually goes for a lower price than a comparable picture coming on the market for the first time in many years; admittedly it is hard to segregate out the selection bias here.  So if the same Jasper Johns print is being auctioned at 10 a.m. and 1 p.m., some people just don't want to wait with their bids.  I wonder also if there is a theorem about how an asymmetric distribution of risk-averse bidders, fearing they might not get the work at all, could generate the same price pattern,

An alternative hypothesis -- likely true in part -- is that even "identical" artworks differ slightly in quality and the auction houses sell the better one first, if only to create a price precedent and excitement effect for the second one later in the day.

Outliers

The new Malcolm Gladwell book.

And now for something not completely different: Here is Robert Mundell's hypothesis about Taxi Driver.  And yes it is that Robert Mundell.

Why do ethicists write such long papers?

I found this fascinating:

If indeed my observation that ethicists hardly write short papers is correct, this might say something problematic about us. For example, that we are less sure of ourselves than other philosophers, and thus feel that we have to go on and on. Or that there is a pro-length bias in the guidance we give to our students; or in accepting ethics papers for publication. Or that the subject makes people feel that they always have to (pretend to) be very serious, because morality is such a grave topic. Or even that ethicists simply tend to have less fun. A while ago Mike Otsuka posted here asking about funny titles for ethics papers, and we all found it hard to find examples.

OK people, the challenge is upon you: what are some funny titles for possible ethics papers?  All of my thoughts in this direction are non-funny, such as "A Good Start," or "Here's Why None of My Papers Have an Abstract."

For the pointer I thank Saul Smilansky.

Tokyo impressions

There are more small things to notice here than anywhere else.  People elevate their cameras on long fishing poles to get better shots in a crowd.  The water container has a separate compartment so that, when you pour, the ice cubes do not spill into your drink.  Or you may wonder: why did I have to order my food by paying into a vending machine?  None of the faucets works in an intuitive manner for me.

I hadn't been to Tokyo since 1992.  What was once futuristic has now become retro and it has made the city more charming and ultimately more convincing. 

Even with the weak dollar it isn't that expensive here.  Hotels are cheaper than in NYC -- not to mention Europe -- and you can eat a great meal for $10 or less if you frequent neighborhood restaurants.  At the fish market world class sushi costs about as much as mediocre sushi in the American suburbs.  I have also ventured into the horrors of real Japanese food, including The Creamy Sauce and Worcestershire sauce.  It's not all hamachi and gyoza, believe me.

Spot the Contradiction

Daniel Gross's review of Sachs' Common Wealth was bizarre.  Consider this:

Even congenital optimists have good reason to suspect that this time the prophets of economic doom may be on point, with the advent of seemingly unstoppable developments like....the explosive growth of China and India.

Huh?  What kind of upside down logic makes high growth rates proof of economic doom?  Proving this was no idle slip Gross goes on to say:

Things are different today, [Sachs] writes, because of four trends: human pressure on the earth, a dangerous rise in population, extreme poverty and a political climate characterized by “cynicism, defeatism and outdated institutions.” These pressures will increase as the developing world inexorably catches up to the developed world. (emphasis added)

Silly me, I thought rising life expectancy, increasing wealth, and lower world inequality, which is what it means to say that the developing world inexorably catches up to the developed world, was a good thing.  And then there is this:

The combination of climate change and a rapidly growing population clustering in coastal urban zones will set the stage for many Katrinas, not to mention “a global epidemic of obesity, cardiovascular disease and adult-onset diabetes.”

Ok, climate change will create problems but how clueless do you have to be not to understand that a large fraction of the world's people would love to live long enough to die from obesity and other diseases of wealth?

Don't misunderstand, I know that growth brings problems.  My dispute with Gross is not that he thinks the glass is half-empty and I think it is half-full; my dispute is that Gross thinks the fuller the glass gets the more empty it becomes.

Addendum: Dan Gross writes to say that he was summarizing Sachs' argument.  Point noted.

My favorite things Japan, cinema edition

1. Kurosawa movie: Ran is the most impressive on the big screen, but Ikiru is a profound study of the psychology of bureaucracy.  There are many many others, including the noir masterpieces and the criminally underrated late period, most of all Dreams.

2. Gangster movie: Should I go with Sonatine?  I don't know them all.

4. Sexual perversion movie: Audition has an incredible piano wire scene.

5. Hobbesian movie: It's Battle Royale, hands down, and yes I taught the film this year in Law and Literature.  One of the students was shocked we would cover something of this nature.

6. Ozu movie: Tokyo Story is the one that sticks with me.

7. Dance movie: Shall We Dance? remains a gem.

8. Anime: Grave of the Fireflies is a knockout, an anime movie for people who hate anime (and war).  Make sure you use the subtitles, not the dub.  I love all Miyazaki, maybe my favorite is Princess Mononoke, just don't expect a coherent Pigouvian vision from it.  Other times I think Totoro is his supreme masterpiece.  Pom Poko, from Studio Ghibli, is essential viewing as well.

9. Mizoguchi movie: First prize goes to the stunning Ugetsu.

10. Godzilla movie: There is the original Japanese first movie, the cheesy but delectable Godzilla vs. Mothra, the implicit retelling of WWII in King Kong vs. Godzilla, Ghidrah the Three-Headed Monster (my personal favorite), one of the MechaGodzilla movies (surprisingly good but don't ask me which one), and the sadly unheralded Godzilla Final Wars.  I'm not sure any of the others are worth watching.

The bottom line: I'm not sure I've ever covered a category with so much quality and depth as this one and I've just scratched the surface.  And yes, I like Tampopo too, but not as much as most of these.  Gammera deserves a mention too.

The Uncanny Valley

Yet the humans' skin could not be too realistic.  It was well known that as depictions of humans became more lifelike, audiences would perceive them as more appealing -- until the realism reached a certain point, close to human but not quite, when suddenly the depictions would be perceived as repulsive.  The phenomenon, known as the "uncanny valley," had been hypothesized by a Japanese robotics researcher, Masahiro Mori, as early as 1970.  No one knew precisely why it happened, but the sight of nearly human forms seemd to trigger some primeval aversion in onlookers.  Thus, the minute details of human skin, such as pores and hair follicles, were left out of The Incredibles' characters in favor of a deliberately cartoonlike appearance.

That is from David A. Price's very interesting The Pixar Touch.  Here is Jason Kottke on The Uncanny Valley.

Local Bounties

One benefit of the economic downturn is that the number of people hoping to earn a reward by calling the police with a tip has increased, especially in regions with a lot of home foreclosures. 

For tips that bring results, programs in most places pay $50 to $1,000, with some jurisdictions giving bonuses for help solving the most serious crimes, or an extra “gun bounty” if a weapon is recovered...

“We have people out there that, realistically, this could be their job,” said Sgt. Zachary Self, who answers Crime Stoppers calls for the Macon Police Department.

The success of these local programs suggests similar international programs could also work.

Links

1. GMU Econ Society blog

2. Top ten Jackie Chan fight scenes?: How can they leave off Jackie against the monks?

3. More on speculation and oil prices as a bubble; very thoughtful analysis

4. Solving the climate change attitude mystery

5. Does religion make people happy?

Network Power

Indeed, while this convergence in ways of thinking and living may extend to influence cultural forms like music or food, it need not necessarily do so.  It is striking that in this moment of global integration producing massive convergence in economic, linguistic, and institutional standards, we should be so worried about restaurant chains and pop music, neglecting much more significant issues.  Famously, Sigmund Freud argued that nationalist rivalries between neighboring countries reflected the "narcissism of minor differences," a pathological focus on relatively trivial distinctions driven by the desire to keep at bay an anxiety-provoking recognition of fundamental sameness.

That is from David Singh Grewal's Network Power: The Social Dynamics of Globalization, one of the most interesting books on cultural globalization in recent years.  He uses the ideas of social networks and peer effects to argue that widespread cultural convergence is occurring, most of all in ways of life.  Here is the book's home page.

There is much wrong in the central thesis.  "Ways of thinking" may be less diverse across countries (France is more like Germany than it used to be) but ways of thinking are now much more diverse within countries and in fact within the world as a whole.  What's so special about having diversity distributed according to geographic or political criteria?  Once you get over the geography fetish, many of the author's main mechanisms don't hold up as accounts of growing sameness of ways of life and thinking.  Has the author spent much time poking around Second Life?

Nor is he capable of simply coming out and saying that lots of countries in the world *ought* to be doing more to emulate Anglo-American ways of thinking.

The following claim is also questionable:

To reshape or reduce the power that the social structures we create have over us, we can only summon the organized power of politics.  The large-scale voluntarism of sociability, by contrast, has always delivered the most varied and elaborate forms of individual subjugation.

Cranky Tyler is about to come out of his shell, so maybe it is time to end this post.  It's still a book worth reading and thinking about.

On a not totally unrelated topic, here is a good post on babies and globalization.