My Summer Media Consumption

Here's a summer wrap up post about what I've been watching, reading, and playing for the past three and a half months. 

Books

The Road to Serfdom

by Frederick Hayek 

This is a classic piece in the pantheon of libertarian works written by a nobel laureate economist who served as the counterpoint to Keynes in the 20th century. Written during WWII in the 40s, it's basically Hayek arguing that the growth of socialism in Germany led to the centralization of power and the erosion of liberty necessary for the rise of the Nazi party. He warns that Great Britain and much of the rest of the Western World is heading down a similar path. Basically, it's the first ever "you're just like Hitler!" arguments (you know who else nationalized the steel industry? Hitler). 

I tried reading this book to get a better insight into the Austrian School of economics, but I just couldn't finish it. He engages in plenty of good ol' communist punching (prices are helpful, absolute power corrupts governments, ect), and in hindsight, it's not terribly surprising that a totalitarian government would also want complete control of its economy. I was just somewhat bored by some of the more lengthy discussions of 19th century German philosophers. I'll have to give the book another go sometime. 

A Deepness in the Sky

by Vernor Vinge

This is a great sci-fi book all about a big intergalatic trading fleet and this planet they discover. I found out about it on Noah Smith's blog post about science fiction novels for economists. I recommend reading his take on it there. Excellent writing. 

Makers

by Cory Doctorow

I also found out about this in Smith's post, so I recommend reading more about it there. This book is not science fiction in the starships and aliens sense, so I was a little surprised by it. It takes place in the near future and is more of a reasonable extrapolation of current trends in 3D printing and how that technology will affect businesses and entrepreneurship. It's well written and centers around some likable characters. Although it was different, I found it very enjoyable. 

Video Games 

Hotline Miami

I already wrote about it here, so check it out. 

Pyschonauts

This is a nifty adventure game that I've been playing on and off for awhile now and finally got around to finishing. The gameplay is fun and the levels creative, but my favorite part of the game is definitely the writing. I've never so thoroughly enjoyed listening to the characters in a game speak! I never once wanted to skip through any dialogue. Some parts of the game could be annoying, as I feel is all too often the case in platformers, but it was still an excellent game. 

Papers, Please

This game has to be one of my favorite document based immigration agent games of all time. Ignore that it's probably the only game of that type. In this game you are an immigration agent for the glorious nation of Arstotzka and you have to check the papers of everyone who wants to enter. You often face a trade off between being efficient and weeding out unauthorized immigrants in order to make money for your family or being generous and letting in the desperate masses while risking punishment. The documents you have to check grow increasingly complex. I have grown very good at cross checking a work permit with a passport after playing this game. The message of the game is also very relevant at a time when so many forget that a tight border is synonymous with an intrusive government. 

TV Shows

In the past, I haven't been much of a TV watcher outside of my regular Colbert, South Park, and Simpsons. However, when I realized that we're living in the golden age of entertainment, I discovered that there's plenty of great shows.

Firefly

This is one that's been recommended to me by many friends, and I've gotta say I liked it. The space western theme works well and I thought the writing was done well. Something about Joss Whedon's directing style was off putting to me at first, but I ended up warming up to it. 

The Wire

I'm presently wrapping up season 4, but I consider The Wire to be the best TV show I've ever watched (yes, better than The Sopranos). Besides having brilliant story arcs that suck you into every character and issue, this show explores so many ideas that are under appreciated in TV. This show teaches so much about sensitive topics like race, poverty, drugs, and police brutality that I think it should be mandatory watching in every high school. I think students would learn more from writing an essay on The Wire than Ethan Frome. 

Arrested Development

After hearing good things about season 4 on NPR, I decided to finally watch this show about which I've heard so much. I finished it a few weeks ago and enjoyed it a great deal. It has no laugh track which is great and the writing is snappy. Plus, there's Buster. Need I say more? I know there are a lot of mixed feelings about season 4, but I liked it, and suspect that I will enjoy it even more when I watch it again. 

September Updates: Art Hop and Chicago

My updates have been sparse this September, so I thought I'd put up an update on some of my activities here in the States as I prepare to leave.

Last Thursday I visited Art Prize in Grand Rapids with my mom and Laurel. For those who are unfamiliar, Art Prize is a yearly event in Grand Rapids where thousands of artists put up works across the city, inside and outside. The top pieces earn a hefty chuck of change, and viewers get to vote to determine the winners. 

An Art Prize piece made by sharpie 

I'd only been to Art Prize once before as a freshman at K. I was once again thoroughly impressed. The competition is a fun way to see a wide variety of art, ranging from abstract multimedia presentations, to a marble angel, to a giant quilt of a Michigan lakeshore. Best of all you get to explore the city of Grand Rapids, which I think is an under appreciated gem of southwest Michigan. I just wish I hadn't missed last year. Luckily I'll be back in time for the next one! 

This Art Prize piece occasionally breathes fire 

Me with Matilda 

This past Sunday through Wednesday I was in Chicago seeing Bryan, Jessie, Matilda, Keith, and Lisa one last time before I leave. We got to go to a delicious restaurant called MK (pronounced in the style of Mr. Mackey). I also took another trip to the Beercade (a place I've blogged about before) with Keith. We went on a Monday night when drafts were a dollar off and there was actually enough room to play at the old arcade machines, although the pinball room was closed. Still, it was fun playing classics like Teenage Mutant Ninja Turtles and Mortal Kombat alongside my older brother (and the beer was delicious). We enjoyed a trip to the Chicago Children's Museum with Matilda, a bike ride along Lake Shore Drive, some delicious Intelligentsia coffee (best cappuccino I've ever had), and an architectural walking tour all about Art Deco. 

These past two weeks have been a fun way to wrap up my time in the USA. Now I just have to finish packing and get on a plane! 

Flags in the river for Art Prize 

One work was a miniature golf course

At MK I got a complimentary dessert! 

Building a skyscraper with Matilda at the Children's Museum 

Great Ronald Coase Story and Quote

I just wanted to share this great story about the recently deceased Nobel Laureate economist Ronald Economist from NPR's Planet Money. In particular, I'd forgotten that Coase had authored a book on the rise of China at the age of 101! I loved this quote from him at the end of the story,

"China's rapid emergence as a global economic power — one of the most important developments of the past generation — took him completely by surprise." 'I thought it would take 100 years, if not more,' Coase said."It seemed striking that an economic legend could be so wrong about such an important subject. I asked Coase what he made of this." 'I've been wrong so often I don't find it extraordinary at all,' he said."

South Park is Right on Syria

I made a post last week where I expressed my skepticism of a military strike in Syria doing much good. Well, things have changed significantly since then, with a statement (gaffe?) from John Kerry apparently offering the promise of a diplomatic solution. It's obviously too early to tell, but these recent developments seem promising. 

I find it funny that this breakthrough came about largely thanks to an offhand comment. I know that whole "give peace a chance" trope is overused...but in this case, I think it applies. Was the communication between the Obama administration and Assad regime really so poor that this solution never came up until now? 

As I thought about the division in public opinion on the Syria issue, I thought back to a great South Park Episode, "I'm a Little Bit Country". Released in 2003, this episode is all about the raging debate over the war in Iraq. The moral of the episode is that the different opinions are good for America. By having a pro war government, the US can go and kick butt when necessary, but all the anti-war hippies let them show the national community that all the US citizens didn't really support the war, allowing the country to not appear like a bunch of jerks and rednecks. This divided approach has (if all the negotiations go well) worked perfectly for the United States. The US was able to provide a credible threat of force, but the divided public opinion pressured Obama into seeking Congressional approval instead of just launching the strikes. The result was that Assad came to the table, and now we'll likely have a peaceful resolution where no more people get gassed and no one gets blown up by American cruise missiles. Even better, this seems like a huge win for US relations with Russia and China. This article from the NYT has a great explanation of the downward trend in US/Russian relations since the Obama administration's "reset". Maybe this can reverse the trend. 

But the larger point is that, as with so many things, South Park is right. 

The Economics of Ice Cream

With summer quickly on its way out, I realized this is my last chance to make a post I've been meaning to write since I started the blog.

Sometime in May, a few of my friends and I went down to the nearby Dairy Queen for a frozen treat. The day was sweltering but, in typical Michigan fashion, it had been in the low 60s and raining the day before. When we arrived at the DQ, there was a line of people spilling out the door. I thought of how the previous day there must have been nearly no customers.

As I sweated in line, I asked myself why the price hadn't adjusted between the two days. Every student in their second or third week of econ 101 encounters a classic supply and demand problem where  a heat wave increases the demand for ice cream, causing the price and quantity of ice cream to increase. In ideal Econoland, long lines don't exist because firms will jack up prices when demand exceeds supply and lower prices when the opposite is true.

However, as my wait extended into its fifteenth minute, I saw that this was clearly not ideal Econoland. Of course, econ 101 also teaches that prices do not instantly adjust for a wide variety of reasons. Customers feel betrayed when a firm changes its prices, especially when they're jacking them up right when the customer wants the item most. Prices also don't adjust because firms don't want to go through the trouble of changing they're menus and calculating new prices every month, let alone every day. In fact, many economists identify price stickiness as a main cause of recessions because firms can't respond to sudden changes in demand without laying off workers.

This econ 101 story, though a sufficient explanation of why DQ isn't changing its prices every day, still left me unsatisfied. I still wondered why there wasn't more variation in the price of ice cream from, say, winter to summer. The change in demand must be substantial enough to justify charging a bit more. I decided to do a search on google scholar for articles on the price changes of ice cream (or lack thereof) between seasons.

After a bit of sleuthing, I stumbled on this gem of an article in the Journal of Industrial Economics. It was ungated when I accessed it from K, but for whatever reason I can only get to the abstract now. The author hit onto the same thing I did but instead for a variety of goods. Turkey and stuffing at thanksgiving? Doesn't get more expensive. Chicken wings at the super bowl? Nope. Same thing for ice cream. In fact, the authors find that prices typically decrease at demand peaks! That DQ blizzard is probably cheaper on a hot July day than it is in the middle of December.

The traditional story for this phenomenon is that supply ramps up in anticipation of big demand. Farmers know that the super bowl creates a lot of demand for wings, so they raise a few more chickens. Supply and demand tells us that this increase in supply will lower prices, canceling out the price increase from the demand shift. This is one alternative to the econ 101 story and it seems to make sense. However, the authors reject this explanation, noting that retailers don't get much better deals from farmers.

The explanation that the author settles on is that it all boils down to competition and market concentration. One of the defining traits of Econoland is perfect competition. Any good you can imagine is being produced by tons of different producers, and consumers can easily choose between any of their many options. In reality, the production of most goods is dominated by a few firms, and real world competition is closer to an oligopoly than it is to perfect competition. When a market is dominated by a few players, they have the power set prices above what competition would normally push it down to. The result is that the normal price predicted by supply and demand no longer applies, and instead the firm or firms in control will be able to set a price that maximizes their profits. Part of the reason for this oligopolistic tendency is that customers aren't fully informed of all their options. They go with the brand they know best on the supermarket shelves, or just walk to the nearest ice cream store.

When demand for a product increases, the concentration of customers increases, making it easier for businesses to advertise. Because everyone is looking to buy chicken wings for the Super Bowl, every chicken wing retailer will want to run advertisements on TV leading up to the big game. The result is that consumers become better informed. A customer may become aware of a brand they had never considered before. The result is that these markets move a little bit away from oligopolistic competition and a little closer to perfect competition. As markets become more competitive, firms have less power to set prices, resulting in a better deal for the consumer. So we find ourselves with those lower prices even when demand is peaking, all thanks to our friend competition.

Sounds good in theory, but the story is a little complicated. The author backed up his assertion by running a statistical analysis on data from hundreds of different goods whose demand varies widely by the time of year. What the author finds is that markets where several brands are competing saw larger price drops than markets dominated by a single firm. This finding fits the theory, because markets with a few firms will see that spike in competition brought on by better informed consumers unlike markets where there's only one firm.

What I love about this paper is that it takes theory and applies real world data analysis. Is this the entire story? Probably not, but the author has made some intriguing observations that suggest it is part of the story. We started in ideal Econoland and observed something that cannot happen there. Rather than throwing up our hands and declaring economics useless, we asked why Dairy Queen doesn't fit into Econoland. There are many answers; increases in supply, price stickiness, behavioral factors, and as this paper explained, imperfect competition. By analyzing the unchanging price of the DQ blizzard through the lens of economics, we can better recognize the deeper factors at work.

AidGrade: Conclusion

I finished my internship with AidGrade last Friday. Working with AidGrade was a great experience and I'm really glad I had the opportunity to help their cause. If you want to know more about AidGrade and my experiences with them so far, check out this post or this one. 

In addition to research skills, more familiarity with Excel (I spent many an hour staring at spreadsheets), and exposure to economic research articles, the one important thing I've taken away from AidGrade is an increased passion for developmental economics. Economics is divided into a bunch of disciplines such as econometrics, finance, international economics, or economic history. Going into most fields involves taking the same broad range of math courses in graduate school, but development economics is apparently a little special. Those who go into development specialize a little earlier and not every school has a strong development program. The work developmental economists do is also different in flavor from that of typical economists. Development tends to be more hands on, with a little more field experiments and work with NGOs operating on the ground. I'm glad that I was exposed to the field early on so that I can think about whether it's something I want to pursue. 

I hope to stay connected with AidGrade going forward. I think a club centered around effective altruism could really have a place at K. The students tend to have a very international and socially conscious focus, so I imagine they'd be interested in the kind of work AidGrade does. I'm also trying to connect K's career center with AidGrade so that more students can learn about the organization's internships and possibly get some funding through the school (if only I'd been so lucky!) 

I encourage you to check out AidGrade's website in the next couple of months. As the work I was helping with wraps up, it should become available online so that you can use the web tools to build your own meta-analyses and compare aid programs. 

Great Economist Ronald Coase has Died

Oldest living Nobel Laureate Ronald Coase died today at the age of 102. Coase was still active in the economics community right up until his death. You can hear an interview of him on NPR here from when he was 101 years young.

Ronald Coase is famous for his ground breaking research on transaction costs. The University of Chicago has posted a great memoriam explaining the significance of his contributions to economics. One paragraph reads:

“Professor Coase’s research on property rights provided the academic underpinning for the establishment of the Acid Rain Program in the United States in the early 1990s, which virtually eliminated acid rain pollution in America,” said Richard Sandor, chairman and chief executive officer of Environmental Financial Products, LLC.

He was also a London School of Economics graduate. Most of the economics blogs I link to on the right will probably have some posts up talking about Coase.

Make Bed Nets, not Bombs

As President Obama beseeches Congress to approve military strikes in Syria, it's worth asking whether lobbing some cruise missiles is really the best way (or even a reasonably decent way) for the US to use its resources to help the international community. Matthew Yglesias does just this in several interesting posts. Yglesias makes several good points about the dubious efficacy of military strikes for humanitarian ends, but his best argument is that even under optimistic assumptions, you can get a lot more bang for your buck by donating money. Noting that many interventionists crow that the US saved tens of thousands of lives in Libya for only 1.1 billion dollars, Yglesias observes that giving money to the Against Malaria Foundation could do even better. 

 According to The Life You Can Save, handing out these bed nets saves about one life for every $1,865 spent. That's to say that if the United States was able to spend the $1.1 billion we spent on the Libya operation on long-lasting insecticide treated bed nets we could have saved almost 590,000 lives from almost certain destruction. America's other allies in Libya spent about $3 billion in total together. That's something to think about.

I've been disappointed by Obama's record on foreign aid. Although President Obama has overseen an increase in the foreign aid budget, less than 1% of our budget goes towards aid, of which much is spent buying bombs and guns for countries like Pakistan, Afghanistan, Egypt, and Israel. I appreciate concerns about the efficiency and effectiveness of aid programs, but we are now entering an age where researchers are rigorously evaluating international development programs. We should use that knowledge to help the global poor.

Luckily, you don't have to convince Congress to pass a law to help some people in need. I encourage you to improve some lives and give.

 

A Great Labor Day Update from Marginal Revolution

A favorite blog of mine, Marginal Revolution, featured a labor day update on what they call, "the most pro-labor policy in the world, open borders." The authors provide several links to interesting articles about immigration. My personal favorite is the third link from Bryan Caplan on dubious moral case for restricting immigration. In his article, Caplan examines whether any of the alleged evils of immigration are sufficient to justify trapping billions in third world poverty. I recommend reading his thorough examination of the different criticisms of immigration.

Happy labor day!