Matt Nolan

The value of a brand

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Kiwiblog links to an interesting story about Vodaphone Vodafone (fixed for my illiteracy). In the story Vodafone begun charging for sending out paper statements after setting up a text statement service. Sure enough customers were unhappy – so they reversed the decision and now are not charging for the statements again.

What was important for me wasn’t what they are doing – but how they are doing it. They termed the change their mistake and that they were now listening to what their customers told them. Whoever decided to make this u-turn obviously knows what happened with New Coke.

In the case of New Coke, the Coke company replaced Coke with a new receipe – but some deeply loyal customers were hurt. When Coke turned around and stated that it made a mistake and changed the formula back they experienced an increase in market share (beyond initial levels) – and customers said they felt “flattered” that Coke actually listened to them.

Who knows, Vodafone might experience the same thing here! It just goes to show, building a differentiated brand both lets the company extract rents and allows customers the “value” associated with having a role in the brand. Sounds good to me!

Matt Nolan

A ranking of Beatles songs

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Marginal Revolution links to a ranking that someone made of Beatles songs.  Its definitely worth a read – it is amazing how diverse the Beatles music was, and how many important economic style considerations they made in their songs.

My top five Beatles songs would be:

  1. “Within You Without You” (27th on his list),

  2. “Norwegian Wood (This Bird Has Flown)” (56th),

  3. “Revolution” (48th),

  4. “We Can Work It Out” (12th),

  5. “Come Together” (55th).

Although I read on Wikipedia that Within you without you is about Eastern Religion (namely Hinduism).  However, it seems to be about economics to me – look at some of the lyrics:

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Matt Nolan

December labour market data: Yuck!

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Yuck yuck yuck.

Given the lack of seasonal adjustment in this series the numbers don’t look as bad as they are – December is normally a very strong quarter for employment after all.

A unemployment rate over 5% in December is a possibility – if these numbers actually line up with the household labour force survey 😛 .  Businesses now believe that the recession will keep going – and they have to lay people off to keep going 🙁 (given that wage costs are “sticky”).

How do you feel about the tanking labour market?  What do you think this should mean about changes to the minimum wage? (ht guy that called me today about the minimum wage review)

Matt Nolan

The issue of debt and government

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There has been a bunch of web ink spilt on a recent article by John Cochrane (both pro and anti, we do discuss a little here) – I plan to spill a little bit more, but on a slightly different issue.

In the article he suggests that current people won’t loan to individuals but they will loan to the government – he suggests that the government could loan the money out to individual firms and household in order to get the economy rolling again.

This reminded me of Ricardian equivalence.  In Ricardian equivalence households expect any cut in taxes, without a cut in spending, to lead to higher future taxes – so they increase savings.  In this case, if government started putting money into risky projects, wouldn’t it increase the rate of return that the investors would need in order to invest in Treasuries?  If this is the case, then the existence of the type of “roundabout” lending that Cochrane discussed does not really exist – although I’m not sure how comfortable I am about spreading risk around like that 😛

Then I remembered that, if the government loses money on loans it will just increase taxes on everyone – so if people think that buying Treasuries leads to risk being “spread around” from risky ventures they will be more willing to.  I wouldn’t say this is a good thing – but if this is why money is flooding into Treasuries at the moment it does give government “scope” to lend some of it out …