Thursday, April 30, 2015

Whoever heard of Protein World?

Until last Tuesday, hardly anyone.  But then it was attacked on twitter for its Marketing strategy...

...the company soon found itself on the receiving end of a 40,000 petition against its “Is your body beach ready?” advertisements, many of which were vandalised on the London Underground network, where they appeared. The ads were variously called “body shaming” and that they “purported violence against women” and on Saturday one SJW [social justice warrior] posted the company’s address and seemed to encourage the offices to be smashed up by “angry feminists with hammers”.
But then an astonishing thing happened: the company not only stood up to the SJWs, but got on the front foot and mercilessly baited them on Twitter, in the process creating the now-infamous hashtag #growupharriet
The company’s customers – surprisingly they are 84 per cent female, proving this wasn’t your standard man v feminist toe-to-toe – became feverish brand champions.
And, boy, they voted with their purses. To date, the furore has turned Protein World’s £250,000 ad campaign into a monster that has added 20,000 customers and driven revenue in excess of £1 million – in the last four days alone.

Wednesday, April 29, 2015

Haliburton patents "patent trolling" to prevent patent trolling

Irony you cannot fabricate from the application:

The inventor and the assignee of this patent have no intention of applying the techniques described herein offensively but instead intend to use the patent defensively to discourage patent trolls and the like from extortionist practices.

Google's competitive disadvantage?

articulated in an editorial by Geoffrey Manne:

Common sense tells us that many consumers search for music on iTunes—they don’t just buy it there—but that search business is effectively invisible to regulators. The same goes for books and retail goods on Amazon. Online retailers collect, collate and present troves of information about their products, and users eagerly consume, and search for, it directly. 
These are undeniably a marketer’s most sought-after searches: those initiated by likely customers. Informational queries, on the other hand, which are Google’s traditional bread and butter, aren’t particularly valuable to advertisers. In fact, only about 30% of Google’s searches even trigger any advertising. 
This dynamic has enabled Amazon to begin positioning itself as an important player in advertising, building an ad network called Amazon Sponsored Links. The retailer figures it has so much data on users that it will be able to target ads much better than Google, which now identifies Amazon as its primary competitor. 
Mobile and social media have transformed search, too. Today we spend more time staring at our phones than even our TVs, and many users interact not through websites in their browsers, but through apps. Mobile has conditioned us to seek instant gratification—immediate, accessible and localized search results. This revolution has migrated to the computer, which has itself become “app-ified.” Now there are desktop apps and browser extensions that take users directly to Google competitors such as Kayak, eBay and Amazon, or that pull and present information from these sites.

Bitcoin transactions are hard to regulate, ...

which is why they are so popular in Argentina:
...A German customer had paid the musician in Bitcoin for some freelance compositions, and the musician needed to turn them into dollars. Castiglione joked about the corruption of Argentine politics as he peeled off five $100 bills, which he was trading for a little more than 1.5 Bitcoins, and gave them to his client. The musician did not hand over anything in return; before showing up, he had transferred the Bitcoins — in essence, digital tokens that exist only as entries in a digital ledger — from his Bitcoin address to Castiglione’s.  
 Had the German client instead sent euros to a bank in Argentina, the musician would have been required to fill out a form to receive payment and, as a result of the country’s currency controls, sacrificed roughly 30 percent of his earnings to change his euros into pesos. 
Bitcoin makes it easier to move money the other way too. The day before, the owner of a small manufacturing company bought $20,000 worth of Bitcoin from Castiglione in order to get his money to the United States, where he needed to pay a vendor, a transaction far easier and less expensive than moving funds through Argentine banks.

Is college worth it?

Two natural experiments suggest that the answer is "yes," especially for low-income, male students:

...The economists and education researchers tracked thousands of people over the last two decades in Florida, Georgia and elsewhere who had fallen on either side of hard admissions cutoffs. Less selective colleges often set such benchmarks: Students who score 840 on the SAT, for example, or maintain a C+ average in high school are admitted. Those who don’t clear the bar are generally rejected, and many don’t attend any four-year college. 
Such stark cutoffs provide researchers with a kind of natural experiment. Students who score an 830 on the SAT are nearly identical to those who score an 840. Yet if one group goes to college and the other doesn’t, researchers can make meaningful estimates of the true effects of college. 
And the two studies have come to remarkably similar conclusions: Enrolling in a four-year college brings large benefits to marginal students. Roughly half of the students in Georgia who had cleared the bar went on to earn a bachelor’s degree within six years, compared with only 17 percent of those who missed the cutoff, according to one of the studies, by Joshua S. Goodman of Harvard and Michael Hurwitz and Jonathan Smith of the College Board. The benefits were concentrated among lower-income students, both studies found, and among men, one of them found.

Friday, April 24, 2015

Book Review: What Can the Rolling Stones Teach You About Economics?

Forbes editor John Tamny spoke at Vanderbilt yesterday to promote his new book "Popular Economics: What the Rolling Stones, Downton Abbey and LeBron James Can Teach You About Economics."

 "A one-man antidote to economic obfuscation and mystification." - George Will 
 "The book establishes Tamny, the editor of RealClearMarkets and the political economy editor at Forbes, as the modern and American Frederic Bastiat." - Veronique de Rugy
DISCLOSURE: the author is a former student and Vandy Alum

MY TAKE:  The book is filled with fun anecdotes illustrating what Henry Hazlitt called "The One Lesson of Economics:
The art of economics consists in looking not merely at the immediate hut at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.

So for example, when you think about taxes, you should look beyond their revenue raising potential, to their negative effect on growth.  In the case of the Rolling Stones, the high marginal income tax rates (83%) and high capital gains taxes (98%) caused the Stones to move production of their "Exile on Main Street" album to the South of France.

Although the effect of the tax on the Stones was probably minimal (after all, the album was produced and turned out great), Tamny asks us to also look at the UK sound engineers, caterers, and anyone else would would have been involved in the production of the album had it been made in the UK.

This is the hardest lesson to teach students, as it asks them to step back from their natural inclination to "do something" to make the world a better place.  But with enough examples like those in the book, students will eventually realize that taxing productive activity to help the less fortunate not only reduces the gains from productivity, but it also increases the gains to becoming less fortunate.  And it is a whole lot more bureaucratic and inefficient.

 These stories also do a good job of updating Hayek's critique of Keynes that the aggregation of modern macroeconomics obscures the real (and perverse) effects of government spending:  stories about individual transactions that were distorted or deterred by government intervention make Hayek's original critique much more accessible.  In fact, in his talk, John often began his answers by reminding us that the macroeconomy is just a collection of individual transactions.

I want to close by saying that it is my second favorite economics book, behind this one.

Thursday, April 16, 2015

Miscalculation in a game of chicken

FT has a nice four minute discussion of the Greece's strategy in their prolonged game of chicken with the EU:

Tuesday, April 14, 2015

Can more regulation help European companies?

From The Wall St. Journal

BRUSSELS—The European Union should regulate Internet platforms in a way that allows a new generation of European operators to overtake the dominant U.S. players, the bloc’s digital czar said, in an unusually blunt assessment of the risks that U.S. Web giants are viewed as posing to the continent’s industrial heartland.

If you have trouble spotting the irony, read the comments:

... here go the clowns, er, the EU regulators again. if you can't compete, then regulate, subsidize and then raise all kinds of protectionist barriers. That might have worked for Airbus, but the digital world has low barriers to entry and is fast moving. Add to it worker protection regulations, limit foreign workers and wonder Herr Oettinger is sounding so frustrated.
... The EU has never stopped to seriously consider why their economic system fails to promote the innovation that leads to Google, Facebook, and Apple. Yet, their very response shows why they fail: their answer is more government regulation and market manipulation. I predict that in 10 years the EU will STILL be lagging since they're focused on today's technology and not innovating for tomorrow.
.... Step 1: Tie legs together before entering race against everyone else. 
Step 2: Insist that everyone ahead of you tie their legs together until you catch up. 
Step 3: ? 
Imagine these guys running the Olympics.

Wednesday, April 8, 2015

Compensating Wage Differentials

Alex Taborok and Tyler Cowen have some wonderful short videos to support their "Online University" initiative. This one explains why wages tend to be higher for jobs that suck - an application of what we call "The Indifference Principle."

Thursday, April 2, 2015

If firms can measure ability, why go to school?

School can serve a variety of economic goals: screening and signaling (but only if dropping out of the labor force, and paying tuition for four years is unprofitable for the bad "types"), in addition to the "added value" that supposedly raises your productivity.  

But what of software coding, where attendance at school has no relation to coding ability.

If you can measure output (coding ability), measuring inputs (grades, courses, college) is redundant.  

HT:  Merle Hazard