In the Office’s sixth episode of season 7, Dunder Mifflin’s “accountant extraordinaire” Oscar Martinez dresses up as the “rational consumer” for the office’s Halloween costume contest. His character is inspired by the contest’s prize, a booklet worth over $40,000 in coupons to many of Northeastern Pennsylvania’s finest establishments. Though the rest of the employees come to work dressed in creative and sometimes head turning (Gabe as Lady Gaga) costumes they have obviously put a lot of thought into, Oscar comes dressed in jeans, a collared shirt and a cardigan as a sign that the booklet should be of no interest Continue reading “I Present to You the Rational Consumer”
National parks are often seen from a western perspective as cool and exotic tourist locations that can bring about a sense of interconnectedness between the urban mind and the natural world. Unfortunately national parks are also the hunting grounds for many profitable underground poaching businesses, and the high demand that the regulatory system around poaching constructs is only further detrimental to the wildlife. Earlier in September 2015, “Kenya’s then-President Daniel arap Moi ignited a pile of 12 tonnes of elephant tusks and helped change global policy on ivory exports. After that, the trade was banned under the Convention on International Trade Continue reading National Parks, Elephants, and Sustainability
Below I present an interview I had with our very own Lorraine Black, discussing her highly intriguing senior economic thesis. Let’s dive right in! Okay, first couple questions: what was the topic of your thesis, and why did you pick that? The topic of my senior thesis was the economic behavior of consumers that play free-to-play multiplayer online video games. I picked it because it struck me as pretty irrational behavior in a relatively new industry. Also I like video games. Good a reason as any. What were your findings? I conducted a survey of 300 League of Legends players Continue reading Thesis Corner: Lorraine Black on Video Games
With Goldman Sachs and Wells Fargo paying multi-billion dollar settlements after admitting to being less than truthful about their mortgage practices, it’s possible other banks on Wall Street might come clean. There is much debate about whether sub-prime mortgages were a conscious (and idiotic) attempt at making a ton of money, or if the banks were as in the dark about the consequences as consumers were before the financial crisis of 2007-2008. It’s easy to blame the banks, they’re the ones who had the power and they knew exactly what they were doing – right? Steve Eisman, the hot-headed portfolio manager from the Big Short Continue reading With Big Banks Coming Clean – Should We Start Breaking Them Up?
In our first post about the salary cap in sports, we learned about how unlimited the baseball cap was while higher revenue teams reap the benefits. In the second part of the three part series, we will be looking at the growing NBA salary cap as it looks to make a big leap in the next couple of years, increasing the player’s benefits. The salary cap has slowly been moving up over the past three years, from nearly $59 million in the 2013-2014 season up to $70 million flat for the 2015-2016 season. For the five seasons before that, it Continue reading The Salary Cap in Sports: Part 2 (Basketball)
Moral Hazard is a term that Economist are familiar with when discussing market failures, or the inefficient allocation of resources. The definition of moral hazard is when there is hidden action taken by one party that incurs costs of another party. But this is just the definition of the term, what does moral hazard truly mean in everyday life? One example that is brought up a lot is when an auto mobile owner becomes more of a reckless driver and justifies it by saying, “It’s fine, I have car insurance.” Obviously auto insurance doesn’t quite work this way, but moral Continue reading Moral Hazard and Health care
Lately, I’ve been reading up on emergent phenomena, systems in which complex behavior “emerges” from small scale interactions between relatively simple elements. Free market economies is a poster child of emergence–no one entity plans out every actor’s behavior. Rather, resource allocation decisions “emerge” from the local interactions of a large number of economic actors. I found some of the comments that Keith Downing made on free market economics in his book “Intelligence Emerging” fascinating, and figured I’d share them here for you all to appreciate. The eye-opening fact that the world works without excessive global manipulation and without many guarantees may initially Continue reading The Economy as a Complex Adaptive System
Pennies are useless. Actually, they are worse than useless. In a way, they are actually harmful. Why? Because they are supposed to function as money. Money is used to “facilitate the exchange of goods and services” and pennies simply aren’t valuable enough to do that. They used to, but thanks to inflation, the buying power of the penny is so small that its practically useless. When is the last time you saw a penny on the ground and actually bothered to pick it up? Never, I know. Simply put, the opportunity cost to pick up, sort and deal with pennies Continue reading Pennies Suck.
“When goods are not allowed to cross borders, soldiers will.” —Frederic Bastiat It’s safe to say that the majority of economists agree in favor of free trade and against protectionism. Many argue against political candidates that threaten to end trade agreements, and employ tariffs on Mexico and China. But it’s also important to be aware of some of the problems with free trade: The first problem with free trade is that people use GDP as a conventional argument. Or when economic value is taken away, or created without a price tag. Free trade can dissolve industries with hidden values. People Continue reading Free Trade or Protectionism?
Two eeks ago I wrote about chapter 4 of The Why Axis. I hope you continue (or begin) to read along with us as we make our way through the book and enjoy it as much as we are! The authors do a great job relaying some tricky behavioral economic ideas while they tackle profound topics in a fun way. One such topic, the gap in childhood education between inner city kids and many wealthy even simply middle class kids, was central in the fourth chapter. I found Gneezy’s and List’s discussion provoking and I have given some thought to Continue reading Reflection on The Why Axis: the Role of Time Discounting in the Education Gap.