Matt Nolan

Caricature of the libertarian, economist, statist divide

/18 Comments/in /by

In my mind there is a simple distinction between the broad brush strokes of libertarianism, the underpinning beliefs of economics, and statism as statements for the scope of government. It goes like this:

Libertarian:

  • Market prices are a good allocation mechanism – therefore market prices make sense.
  • Initial endowment of resources is fair – therefore no need to redistribute initial endowments.

Economist:

  • Market prices are a good allocation mechanism – therefore market prices make sense,
  • Initial endowment of resources is unfair – need a democratic state to define what is fair and redistribute endowments.

Statism:

  • Market prices are a poor allocation mechanism – therefore market prices are not necessarily any good and pragmatic government shifts to prices make sense,
  • Initial endowment of resources is unfair – need a democratic state to define what is fair and redistribute endowments.
Matt Nolan

Beer goggles and “demand”

/16 Comments/in /by

A recent study suggested that the idea of beer goggles did not exist. The study stated that men who had been drinking actually rated women lower than men who had not been drinking – the author went from this empirical “fact” to a claim that the idea of beer goggles is false.

Now even if the empirical fact is indeed true, I would be a little more careful before claiming that such a commonly accepted social belief is wrong.

The essence of “beer goggles” (lets stick with the male version) is that men are more willing to sleep with a given woman after drinking beer.

Now, even if men find women less attractive when drunk than they do when they are sober – it does not mean that they are necessarily less willing to sleep with them. Fundamentally, we have to ask how beer influences “how low” a man is willing to go in terms of attractiveness when drunk (we are of course assuming that the supply curve is unchanged 😛 ).

If beer makes men willing to sleep with a significantly lower “attractiveness level” of woman – than it is possible that even if he finds her less attractive he is more likely to sleep with her.

This is still an interesting finding – as it tells us that we don’t find people more attractive when drunk. And in order to have the “beer goggle” phenomenon beer must simply make us more willing to sleep with less attractive people.

Note: The article dodges this issue by defining “beer goggles” as finding people more attractive on an objective scale. But I don’t think that this definition catches the true nature of beer goggles – which is simply slang for saying that you slept with someone when drunk that you wouldn’t have sober …

Matt Nolan

Interest free loan lollyscramble part II

/10 Comments/in , /by

Not content with the interest free student loan scheme the government has decided it might be time to add an interest free home loan scheme (ht Rates Blog).

Now, this is essentially a transfer from everyone (taxpayers) to first home buyers and the people they are selling to.  In such a situation I have to ask why?  It certainly doesn’t seem fair to take money from people and give it to first home buyers and the section of the property market they are involved in … (disclaimer:  I would be able to get the loan as I would be a first home buyer – just like I have an interest free student loan.  This doesn’t stop me as an economist saying that they are bad policies)

The government says it is to “encourage building” – if this is the case, then why this scheme?  Why not a direct subsidy to home builders.

Furthermore, why do we want to encourage building – why aren’t we doing enough building.  The answer I believe is that in the current environment residential builders are credit constrained – so why doesn’ the government just offer them loans (at a MARKET rate of interest).

Bad policy idea …

Matt Nolan

Cartoon: The two-handed economist

/5 Comments/in /by

Another Dilbert (I promise to cut back on posting them – it was just a great set of economist cartoons 🙂 )

Source Dilbert.

Never have I seen the two-handedness of economists and the “physics envy” of economists intertwined in one short cartoon.  Very good 😀

goonix

Tony Veitch and the economics of suicide

/11 Comments/in , , /by

The Herald are reporting that Tony Veitch has (once again) attempted to take his life. The story is very sad but did get me thinking about whether suicide is ever a rational response.

There is some literature (here, here and here) on this very topic. The most interesting thing for me was that an attempt at suicide can be rational so long as the attempt is not successful. A failed attempt tends to significantly increase income (by 20.3% on average, relative to those who consider suicide but do not make an attempt) as more resources, such as healthcare and affection, are made available to the person who made the attempt. The more serious the attempt, the greater is the impact on income (36.3% on average for so-called ‘hard-suicide’ attempts).

This economic approach to suicide runs counter to the traditional view that suicide occurs at a fragile point in time when someone is acting irrationally.

In the instance of Tony Veitch, it is difficult to see how a positive income effect would be gained from his numerous attempts at suicide, given his broadcasting career has been ruined by the case. However, this might be underplaying the positive, non-financial, effect that a ‘cry for help’ can have on an individual. On the other hand, Tony Veitch could simply be acting irrationally.

Whether Tony Veitch is acting rationally or irrationally, one thing is certain – the case is extremely tragic.

goonix

Clogged email inbox? Economics may be able to help you out…

/14 Comments/in /by

The other night I caught the film ‘Second Skin’, showing at the World Cinema Showcase. Second Skin an MMORPG (Massively Multiplayer Online Role Playing Game – think World of Warcraft or Second Life) documentary about virtual worlds and the real lives they effect. It’s a decent watch.

On the film they interviewed a “virtual world economist”, Edward Castronova, about the markets that have evolved in these online games. I went to check this guy’s website and stumbled across a product that intrigued me.

Seriosity have developed a product called Attent™, which involves assigning a monetary value to emails to signal their importance. The problem that this product is trying to solve is that so many emails are sent around each day that it is difficult to efficiently determine which emails are truly important, while senders tend to send more emails than is optimal (such information overload apparently costs US corporations hundreds of billions of dollars per year).

When senders ‘pay’ to send their email, their behaviour naturally changes so that potentially less, better quality emails are sent. Emails are visibly tagged with a currency value that signals the importance of the message, which improves efficiency at the readers’ end.

Whether such pay-to-send technology takes off remains to be seen (there is an obvious issue of critical mass) but I thought it was a tidy way of incentivising potentially welfare-enhancing behaviour.