Thursday, March 31, 2022

Does taking econ make you rich?

$22,000/year (46 percent) higher more than they would have with their second-choice major

HT:  MarginalRevolution


Monday, March 14, 2022

Software Development performance metrics

To better align the incentives of individual software developers with the goals of a company that sells software as a service, SaaS, companies need better metrics than lines of code. 

Impact, for example, can compare a contribution that is 100 lines of new code (illustrated on the right) to one that represents only 18 lines (on the left) by taking into consideration:
  • that the change required modifying previous work 
  • that edits took place in 4 different locations 
  • that 3 different files were affected 
It would quantify the 18 lines as more 'impactful,' than the 100 lines of code.

Like most intellectual property that can be easily copied or duplicated, the algorithm is proprietary.   

Saturday, March 12, 2022

Pricing Gasoline

The price of a barrel of oil has shot up due to the Ukraine/Russia War and many felt the sting at the gas pump. This story at NBC News interviewed an owner of three gas stations in Texas who said he is losing money with the price increases.

“We’ve raised the price of fuel as little as we could [and] absorbed the price increases to cut into our profits,” he said. “On Friday, the wholesale price went up 21 cents. … Our price at the pump went up 11 cents.”

This indicates about a 52% pass-through of a change in industry marginal costs to prices, at least in the short-run. Slightly more of the burden of the cost increase falls on consumers with the rest falls on gas stations. The size of the pass -through is determined by both demand and supply elasticities. Perfectly elastic demand would generate a 100% pass-through while perfectly inelastic demand would generate no pass-through. This is somewhere in between and is consistent with recent estimates of the elasticity of demand for gasoline of -0.37.

Thursday, March 10, 2022

Incentives Matter - Ukrainian Edition

The Ukrainians are offering 5 million Russian rubles and full amnesty to soldiers if they, “put down their guns and voluntarily surrender to prison.” That's about $47,000 or two years of average Russian GDP per capita. That may be enough to sway a wavering Russian conscript. But Ivan may not trust it. Would they better trust it if it came from the US?

My colleague, Tim Wunder, says the US should back these offers on deficit reduction grounds alone.  For all 200,000 Russian troops thought to be involved, this would come to $9.4 Billion. The US House just approved $13.6 billion in aid to Ukraine so it is cheaper than funding the war. Not all have to accept the offer for the invasion to collapse. The other thing about this strategy is that we can afford it while the Russians could not afford to reciprocate. Tim suggests an extra amount thrown in if you "bring a friend." Bring a whole platoon and get even more. Heck, work it like a multi-level marketing campaign.

Yes it would be cheaper, but moral too.

Friday, March 4, 2022

Delivery economies of scale

Firms that deliver a lot of stuff have a huge advantage over smaller rivals because they can design more efficient routes. In the figures above, we plot the shortest delivery routes for randomly distributed customers on a 1x1 square. The length of two independent routes on the left is 5.68.  When the routes are combined on the right, as they would be if one firm outsourced its delivery to the other, route length goes down to 3.73, a reduction of 34%. 

Such route consolidation not only reduces cost, but it also reduces traffic and pollution.  You may recognize this as the "Traveling Salesman Problem" from your Ops class.  It is the source of big economies of scale, as the average cost per delivery goes down the more deliveries a firm makes in a given area.  

Revealed preference: young Russians are leaving

From The Economist:
Vladimir putin, so intent on bringing Ukraine under his control, is neglecting the problems facing Russians at home. A survey conducted between February 17th and 21st—that is, in the week before Mr Putin’s invasion—by the Levada Centre, an independent Russian pollster, found that 43% of Russians between the ages of 18 and 24 wanted to leave the country for good. And 44% of those who hoped to emigrate cited the “economic situation” as their motivation.
Moving to higher valued uses

Which are the best charities?

From GiveWell
  1. Medicine to prevent malaria, sub-Saharan Africa ($4500/life saved)
  2. Nets to prevent malaria, sub-Saharan Africa ($4500/life saved)
  3. Supplements to prevent vitamin A deficiency ($3000/life saved) 
  4. Cash incentives for routine childhood vaccines ($4500/life saved), Africa
  5. Treatments for parasitic worm infections (deworming)
  6. Treatments for parasitic worm infections (deworming)
  7. Treatments for parasitic worm infections (deworming)
  8. Treatments for parasitic worm infections (deworming)
  9. Cash transfers for extreme poverty, mostly Africa

Tuesday, March 1, 2022

Forecasting the Future of Russia

Need a forecast of how the Ukrainian / Russian conflict will be resolved? Ask the prediction markets! Predictit has created a security that tries to get at this. The price of this instrument can be interpreted as the probability that Putin holds onto the Russian presidency through the end of 2022, as determined by the collective wisdom of people willing to stake money on their beliefs. It started at 84% on 25 Feb but is closer to 74% as of 28 Feb.