Amazon is buying books for $13, and selling them for $9.99.

Donald Marron has an interesting post about Amazon's negotiations with book publishers.  The gist of it is whether Amazon's policy of buying electronic books for $13 and selling them for $9.99 is good for the industry.  In the short run, at least, publishers sell more books at higher prices.  The long-run potential cost of this practice is that Amazon becomes the "platform" or "essential facility" of choice for buyers and sellers of books.  Currently it sells 80% of online books.

If you knew then what you know now, what advice would you give?

...to High School Seniors?  From various sources:

• Set goals each day.
• Be more like Plato and less like Aristotle.
• Don't underestimate yourself: trust your instincts as others are not as smart as they seem.
• It is far less important which college you go to than what you do when you get there.
• Especially early in your career, look for great jobs not great money...the latter is more likely to come if you achieve the former.
• Consider working for smaller companies early in your career, you have to do more and learn more...about a lot more things.
• You make real money through ownership, not a salary.
• Company’s don’t provide job security, credentials do.
• Be obsessed with hiring great talent
• Be painfully honest
• Do something distinguishing, constantly think of ways to know something, have done something that separates you form the rest.
• Volunteer
• Try things that make you feel uncomfortable, that you would not ordinarily do because you’re insecure about your ability to do it.
• Avoid the herd...by the time it’s a herd, the opportunity has passed.

Hypnotizing Chickens

The New York Times reports how that ubiquitous business tool, PowerPoint, has also infiltrated the military.

Like an insurgency, PowerPoint has crept into the daily lives of military commanders and reached the level of near obsession. The amount of time expended on PowerPoint, the Microsoft presentation program of computer-generated charts, graphs and bullet points, has made it a running joke in the Pentagon and in Iraq and Afghanistan.

“PowerPoint makes us stupid,” Gen. James N. Mattis of the Marine Corps, the Joint Forces commander, said this month at a military conference in North Carolina. (He spoke without PowerPoint.) Brig. Gen. H. R. McMaster, who banned PowerPoint presentations when he led the successful effort to secure the northern Iraqi city of Tal Afar in 2005, followed up at the same conference by likening PowerPoint to an internal threat.

“It’s dangerous because it can create the illusion of understanding and the illusion of control,” General McMaster said in a telephone interview afterward. “Some problems in the world are not bullet-izable.”

And, by the way, the post title of "hypnotizing chickens" comes from the name of PowerPoint presentations that are specifically designed not to impart any information, like military briefings for the press.

Restricting Kid's Access to Violent Video Games

The Supreme Court is taking on a case in which California is restricting kids from purchasing violent video games so as to protect children. The counter-argument is that this is an infringement in first amendment protections of free speech. This is slightly off topic for this blog, but I will indulge in some self-promotion as this is an area in which I have done some research.

Ward, Michael R. “Video Games and Adolescent Fighting,” Journal of Law and Economics, forthcoming
Abstract:
Psychologists have found positive correlations between playing violent video games and violent and antisocial attitudes. However, these studies typically do not control for other covariates, particularly sex, that are known to be associated with both video game play and aggression. This study exploits the Youth Risk Behavior Survey (YRBS) that includes questions on both video game play and fighting, as well as basic demographic information. With both parametric and non-parametric estimators, as more demographic covariates are accounted for, the video game effects become progressively weaker. The overall video-game-to-fighting link is modest and not statistically significant. The remaining positive association appears only for individuals who play four or more hours per day.

Ward, Michael R. "Video Games and Crime," Contemporary Economic Policy, forthcoming.
Abstract:
Psychological studies of the effects of playing video games have found emotional responses and physical reactions associated with reinforced violent and antisocial attitudes. These markers may be associated with increases in one's preferences for antisocial behaviors or may indicate that one's desire for actual antisocial behaviors are partially sated. I investigate whether video game play is associated with observed antisocial behavior outcomes. The incidences of various reported crimes are related to a proxy for increased gaming, the number of game stores, from a panel of US counties from 1994 to 2004. With fixed county and year effects, I find that more game stores are associated with significant declines form most types of crimes. Analogous proxies for other youth related leisure activities - sports and movie viewing - do not have a similar effect. I find that mortality rates, especially mortality rates stemming from injuries, also are negatively related to the number of game stores. These results are robust to various alternative specifications.

Ongoing research with co-authors Scott Cunningham and Ben Engelstaetter examines the role of violence in video games on crime.

Benefit Corporations?

Maryland recently became the first state to pass a law creating a new type of legal entity known as a "benefit corporation."

Under the new Maryland law, benefit corporations must spell out their values in their charters, report annually on activities that benefit the public, and submit to third-party auditing of their societal impact. Becoming a benefit corporation, or shedding that status, would require approval of two-thirds of shareholders.

Apparently, the law also provides the company with greater protection from shareholder lawsuits. California, New York, and Vermont are considering similar laws.

It will be interesting to follow this phenomenon. Will investors be more or less willing to provide funds to these corporations (which seem to explicitly reject the idea of maximizing shareholder value for the broader goal of maximizing stakeholder value)?

It Ain't Easy Being Green II

It looks like UT Arlington is getting a bargain. The BBC reports that a Danish eco-hotel is paying guests to produce electricity with an exercise bicycle.

Guests will have to produce at least 10 watt hours of electricity - roughly 15 minutes of cycling for someone of average fitness.

For this effort, they will be given meal vouchers worth $36 making this energy cost $3600 per kwh ($36 / 0.01 kwh) or 20,000 times more expensive than our solar panels. I suspect the real value of the plan is in the marketing value and it worked as the BBC picked up the story. However, I predict the scheme may not survive much longer than the marketing value.

Hat tip MarginalRevolution

If transparency is good, isn't more better?

The financial regulation bill just voted out of committee includes a provision that requires derivatives to be traded only over exchanges.

All the major bills would require that most derivatives be settled in a centralized system and traded over exchanges. Supporters say this would improve market transparency, drive down prices for users of derivatives, and provide more information to regulators.

Well, why stop there? How about we require all employment contracts to be settled over exchanges. Every week your job description could be posted and an auction could commence for services rendered. After all, isn't all this fuss over relationship specific investments affecting the form of the contract is just a smokescreen for underhanded dealing? And appeals to transactions costs affecting the form of the transaction carry little weight. After all no one has ever won a Nobel prize for for this harebrained idea (here, here).

How about exchanges for congressmen too? It really sucks when a lobbyist thinks that he has bought a congressman's vote on an issue only to find out later that someone else outbid him in some clandestine deal. Surely an exchange would make bribery campaign contributions more efficient. Moreover, the transparency would allow constituents to see how important various issues are to other groups.

Renting vs. Buying

David Leonhardt at the New York Times reports on a recent study comparing the costs of renting vs. buying in 54 US metropolitan markets.

A simple way to do the comparison is to look at something called the rent ratio: the purchase price of a house divided by the annual cost of renting a similar one. The number 20 provides a useful rule of thumb. When you do the math, you discover that a ratio above 20 means you should at least consider renting, especially if you may move again in the next five years or so. When the ratio is well below 20, the case for buying becomes a lot stronger.

With the decline in housing prices, renting looks less attractive in many markets.

Sign of the times

Seen this weekend, in Nashville

Blonde Women Make More Money

According to a forthcoming study , "Physical appearance and wages: Do blondes have more fun?" in Economic Letters:

This study investigates the influence of hair colour, in particular blonde hair, on women’s own wages and also their spouse’s wages using a large U.S. data set. Regression results indicate that blonde women receive a wage premium equivalent in size to the return for an extra year of schooling. A significant blondeness effect is also evident in the marriage market. Blonde women are no more or less likely to be married; but, their spouse’s wages are around six percent higher than the wages of other spouse’s.