jamesz

Yes, it IS the referee’s fault!

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You always here about how biased referees are from football fans. However, Matt and Agnitio are model football fans and seem to rarely criticise the referee, even when Liverpool are getting walloped. Now Robin Hanson links to a study which gives them a reason to lambast the ref a bit more:

Referees, who are appointed to be impartial, tend to favor the home team by systematically awarding more stoppage time in close matches in which the home team is behind. They also favor the home team in decisions to award goals and penalty kicks.

Not that we should be surprised by this news: it would be odd if referees were such a different breed that they could block out all the incentives to appease the home crowd. Why should we ascribe some superhuman power to them that none of us possess? Fans everywhere can rejoice in the knowledge that all referees are likely to be biased towards the home team, or whatever team they personally sympathise with. It’s just human nature and we can expect no more of them. Read more

Matt Nolan

Inflation psychology

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‘Inflation psychology’ was the topic of a recent inflation update by Stephen Cecchetti (h.t. Freakonomics blog). In it he mentions that people seem to have selective memories regarding price changes – namely people are likely to remember price increases more than price falls.

I once mentioned such a potential bias when I commented on Kiwiblogblog, it is a bias that I definitely hold, and I suspect other people do too. For example, did you know that the nominal New Zealand price of petrol is only starting to reach the level recorded in July 2006 now? People often remember the big increase in petrol prices in mid-2006 and late 2007, but they seem to forget about the significant fall in prices that occurred between these periods.

The question then is, what does this bias imply for inflation?

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jamesz

Taking a look in the mirror

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Over at NZQuest, Oliver Woods claims that economics

…works around perfect conditions and universal application of models and theories developed many years ago to any economic problem, believing history, society and all sorts of other factors undermine the ‘homo economicus’, or the supposedly rational profit-driven man who thinks entirely in his own self-interest and only helps others when they can help him.

As Matt has previously addressed there is a huge difference between positive statements and normative judgments. Woods is confusing the judgments he attributes to economists with positive statements of economics. Read more

Matt Nolan

The demand curve slopes downwards – New Zealand petrol edition

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Stuff mentions a survey done by Research New Zealand on petrol prices and household consumption of petrol. In the survey they found a number of results that seem to follow the basic idea of a demand curve.

From the article the results were:

  1. 32% of people said they consumed less fuel since the price rose (I am assuming that the remaining 68% would consume the same amount, not more 😉 )
  2. Half of consumers said they would consume less fuel if the price went over $2 a litre
  3. More woman are driving less than men (35% to 29%)
  4. 70% of those that earn over $70k have not change petrol consumption
  5. If petrol crossed $2, 64% of those earning under $40k would consume less petrol compared to 49% of those that earn over $70k.

It is entirely possible that these facts were cherry-picked by the NZPA article, however lets try to understand them.

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jamesz

Caps on healthcare

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Greg Mankiw reports that a lady in Britain was prevented from supplementing her state-provided healthcare with private care. Apparently the NHS favours equality over efficiency:

Officials said that allowing Mrs. Hirst and others like her to pay for extra drugs to supplement government care would violate the philosophy of the health service by giving richer patients an unfair advantage over poorer ones.

Clearly, this restriction on her ability to spend her money as she sees fit is not allocatively efficient. The policy is also likely to diminish the health of the population, as the rich are no longer allowed to boost their healthcare levels above what is offered by the government. That, in turn is likely to lead to a greater burden on the government run, public healthcare system which lacks good services such as this Dentist In Huntington Beach CA.

The morality of equality must run strongly through the British government for it to prevent spending that would reduce the load on its own health funding. Mankiw has an interesting analogy for those who agree with the government’s policy:

Should a parent who hires an after-school tutor for his child be barred from sending the child to the public schools?

Will Taylor

Permanent and Temporary Shocks: Buy No Petrol Day

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I saw an interesting piece on Breakfast this morning (now that I have a “real” job I’m actually up that early) about how today is buy no petrol day.

Apparently the idea is if we all buy no petrol today this will “hit the petrol company’s bottom lines” and make them clean up their act or something like that. This just reminded me of my honours macro course when we talked about the different effect permanent and non permanent shocks have on the economy. To cut a long story short, temporary shocks have no real effect while permanent ones d0 (if tax cut today will be followed by a tax rise next year you save now to pay for the tax rise later (i.e no change in consumption), if the tax cut is going to be permanent then you will probably spend more (i.e consumption increases, the economy is stimulated and everybody is happy).

Applying this logic to our current situation, everybody not buying petrol for one day, while a great way to raise awareness (it made breakfast!), is not going to have any effect on the oil companies behaviour if the people who didn’t buy petrol today are simply delaying filling up until tomorrow. 

In summary if people want to change petrol companies behavior by hurting them financially,  it needs to be done by a permanent decrease in petrol consumption as this will have a non transitory effect on profit, not just be a blip on the radar that is gone the next day.

I haven’t had a coffee yet so I don’t have the energy for sarcasm

Agnitio