Marginal Revolution

Markets in everything

"Twitter-equipped scale tells the world how much you weigh."

How's that for purchasing self-constraint?  Or do you just stop weighing yourself?

For the pointer I thank Eric H.

Caplan on Education

How much does increasing college-going rates matter to our economy and society?

Caplan: College attendance, in my view, is usually a drain on our economy and society. Encouraging talented people to spend many years in wasteful status contests deprives the economy of millions of man-years of output. If this were really an "investment," of course, it might be worth it. But I see little connection between the skills that students acquire in college and the skills they'll need later in life.

Much more here, including answers from Charles Murray, Richard Vedder and others. Hat tip to Arnold Kling.

Assorted links

1. One calculation of implicit marginal tax rates on the poor.

2. The rise of Andrew Ross Sorkin at the NYT.

3. The problems of health care transition: "drop your bad risks ASAP" is another one.

4. Is there hope for Detroit?

5. "Salvaged [nuclear] bomb material now generates about 10 percent of electricity in the United States..." -- read more here.

6. Debunking of Senate vote chart.

7. UK list of best movies of the decade.

8. New Mark Thoma blog at CBS MoneyWatch.

If I believed in Austro-Chinese business cycle theory

Most of China's growth this year has been unsustainable, driven by stimulus. China's money supply has risen 29% in the past year. At the government's behest, banks have increased their lending by nearly $1.4 trillion, or 32%, during that time.

That flood of borrowed cash has been channeled into new infrastructure and production capacity. These investments will account for up to half of China's gross domestic product this year, according to some estimates.

A key question is whether China needs all of this investment. Analysts at the London hedge fund Pivot Capital Management say that China already has enough idle steel-production capacity, for example, to match the steel output of Japan and South Korea combined.

Meanwhile, the ratio of investment to GDP is rising, suggesting China's investment is less and less efficient, says Edward Chancellor at Boston asset-management firm GMO.

The combination of soaring investment and dwindling returns was seen in Japan in its asset bubbles in the 1980s and in the "Asian Tigers" just before their crises in the late 1990s, he says.

The link is here.  Does anyone know how to say "excess capacity" in Chinese?  Even more importantly, can you get it past the typepad spam blocker?

What does a free service charge signal?

Eduardo Diaz, a loyal MR reader, asks:

A question for you...have you ever compared in the context of "trade repairs" (i.e. garage door repair, plumbing, etc.) the pros and cons of companies that offer free estimates or evaluations vs. companies that charge an inspection charge?   

My intuition would make me hypothesize that: Free estimate company would have a stronger incentive to be nice to get the business.  They might "sugar coat", if they are unethical and think they can get away with holding you up later.  In this model, the customer might feel "obligated" to reciprocate for the courtesy of the free estimate by giving this provider the business. Company that charges for the inspection would have an incentive to be a little more straight with you, this tendency increasing as the inspection charge comes close to cover the cost to the company of the inspection.  Incentive to be nice is less in this case.  Perhaps, the repair techs with "less people/sales skills" might gravitate to this business model.  or perhaps this model attracts more techs that live far away or don't have a "critical mass" of business in a particular area. These trade repair industries are very competitive due to low barriers to entry and difficulty to collude, so I think competition probably drives the cost structure for those companies to a pretty similar point.   Thus, I'd expect my total cost with a free inspection company vs. an inspection-charge company should be the same, assuming I'm properly informed by reading up on-line reviews, getting several quotes, etc. in other words, the no charge companies will need to recoup the cost of all the inspections that don't result in profitable repair work.

If you think you are likely to proceed with the repair work (rather than junk the thing, try to fix it yourself, decide you're in fact a garage door hypochondriac, etc.), you might be more likely to pay the upfront fee for the estimate.  Of course the company knows you will behave this way.  If they have any ability to price discriminate, for the service itself they will charge you a higher price ex post.  You in turn will shy away from this equilibrium.  In essence paying the upfront service charge reveals something about your type, namely that you are eager for repairs.  We're then more likely to see free estimates as the dominant strategy.  Some subset of firms will charge for estimates if they can appeal to customers who in essence want to face price discrimination to ensure higher service quality from the wealthier firms with more valuable long-term reputational franchises.

Alternatively, assume that if you have to pay to learn the price, the said price information is valuable.  Price information is valuable when the market in question isn't so competitive and when search costs are high.  Producers are signaling that their markets are not so competitive when they charge for service estimates and many producers will shy away from letting on about that to their customers. 

Sometimes you can flip this kind of argument.  You, as a customer, might assume that a firm which charged for estimates had especially informed customers.  You might hope to masquerade as another such informed customer and thus patronize such a firm, hoping that it will treat you well because it is used to dealing with informed buyers.  It is an open question whether this equilibrium holds up.

You can spin many other scenarios, those are just some ideas that came to mind.

NASA FAQ 2012

NASA scientists are frequently being asked questions concerning 2012 and for this reason they have created a web page to answer these questions and reassure the public. e.g.

Q: Is there a planet or brown dwarf called Nibiru or Planet X or Eris that is approaching the Earth and threatening our planet with widespread destruction?

A: Nibiru and other stories about wayward planets are an Internet hoax. There is no factual basis for these claims. If Nibiru or Planet X were real and headed for an encounter with the Earth in 2012, astronomers would have been tracking it for at least the past decade, and it would be visible by now to the naked eye. Obviously, it does not exist. Eris is real, but it is a dwarf planet similar to Pluto that will remain in the outer solar system; the closest it can come to Earth is about 4 billion miles.

Sigh.... I too fear for our planet.