Tim Harford The Undercover Economist

Articles published in October, 2007

Supernanny insists you have the right to opt out

FT Comment, 27 October
An economist once dubbed “champion of choice” by The Guardian newspaper would like your employer to organise an exercise hour for you and your colleagues. Professor Julian Le Grand was once a social policy adviser who had the ear of Tony Blair.

Now he has everybody in Britain sitting up (sorry) and taking notice. Even though Prof Le Grand intends to offer an opt-out to anyone who doesn’t much care for the idea of doing a bench-press with the boss as spotter, that doesn’t make the idea appealing. Learn More

Virgin on the brink

Dear Economist,

I am a woman in my early 30s. I am also a virgin. Should I be?

Gloria, New York

Answer at ft.com, subscription free.

27th of October, 2007Dear EconomistComments off

Commuter literate

I was recently invited to a friend’s wedding in the historic city of Oxford. Wearing our best robes, and with a toddler, a baby, nappies and toys in tow, my wife and I drove from London to Oxford, shunning the alternative of a journey via bus, Tube, train and bus again to the wedding venue. My wife is a keen environmentalist, but not that keen.

On arrival in Oxford, an economic puzzle. It is cheap to park in Oxford’s centre – free, in many areas – but with a maximum stay of two hours, it was impossible to park there for the wedding. I eventually resorted to dropping the family at the city-centre venue and weaving up and down North Oxford’s residential streets for a couple of miles.

I left the car for five hours in a remote two-hour space and hoped I’d get away with it.

(I did.) When the wedding was over, I walked back to the car, drove back into the town centre, picked up the family, and drove them home to east London.

I’ve since asked Oxfordshire County Council what they were playing at…

Continued at ft.com, subscription free.

Punctuality

Dear Economist,

A friend of mine is absurdly late whenever we arrange to meet. I find it infuriatingly rude. Can you suggest a cure?

Yours,
Beatrice, London

Answer at ft.com, subscription free.

20th of October, 2007Dear EconomistComments off

Did you pay to read this?

Until recently, there were two types of newspaper website: those that made you pay to read many of the articles (The New York Times, The Wall Street Journal and the Financial Times) and those that didn’t.

That is changing. The New York Times recently announced that almost all its online material would now be free. FT.com has just moved to a system of free access for occasional visitors. And Rupert Murdoch has strongly hinted that the Journal might do something similar. The theory is that advertising revenue will outstrip subscription revenue.

So is this the death of subscription-model newspapers? And will the availability of so much free online journalism also doom their pricier print editions to a slow death?

These are hard questions, because the internet is changing so quickly that first principles are little help. One smart response is to experiment, but such experiments can be pretty expensive if they don’t work out.

The New York Times’s retreat from a subscription model is widely portrayed by online commentators as a humiliating and belated acceptance of the inevitable. But Matthew Gentzkow, an economist at the University of Chicago, recently published research that suggests that there has been no expensive mistake…

Continued at ft.com, subscription free.

Tricks of the trade

In the late 1870s, a magician named Buatier De Kolta was mesmerising audiences in Paris by producing big bunches of paper flowers from an empty roll of paper. Nobody knew how the trick was achieved, until a gust of wind blew one of the flowers on to the floor in front of the stage. A magician in the audience seized it and ran out – De Kolta’s trick was soon being performed by many of his rivals.

The story is told by Jacob Loshin, a recent graduate from Yale Law School, in a working paper on how magicians protect their tricks. Such outright thefts would be hard to imagine today because magicians have developed a professional code of conduct to defend their most valuable property: their ideas.

The research bears – albeit obliquely – on an issue that is only going to become more important: intellectual property in a world where more and more of the wealth that is created takes the form of ideas rather than objects. Intellectual property law does not protect magicians’ tricks very well, and it does not help much in high fashion or in haute cuisine either – all areas that Loshin describes as a “negative space” for intellectual property.

For the fashion industry, a lack of intellectual property protection may not be a problem: the trickle-down of high-end fashion helps create obsolescence and the demand for more high-end fashion. But chefs and conjurors need a little help protecting their ideas. Lacking legal shelter, they resort to professional norms.

Loshin describes the magicians’ norms, which encourage the selective sharing of techniques, limit copying and credit the re-discoverer of a long-dormant technique with the same rights as the trick’s inventor. The economists Emmanuelle Fauchart and Eric von Hippel report very similar norms for the sharing of recipes among French chefs.

In both cases, the norms are enforced through social pressure that can be very powerful. Loshin describes the case of one company that manufactured tricks that were regarded in the eyes of the profession – although not the law – as proprietary. Magic journals would not accept the company’s ads, professional magicians shunned its offerings, and bankruptcy soon followed.

These techniques work because the fraternity of magicians – and chefs – is close-knit. Aspiring chefs work long apprenticeships and rely on word of mouth for their next job. Magic journals are not available at newsagents, and even Prince Charles had to perform an examination before being accepted as a member of The Magic Circle. A magician who steals from another, or reveals secrets not widely known by non-magicians, will not be entrusted with new ideas or recommended by other magicians.

These informal sanctions work well for both chefs and magicians. But they are not perfect. Magicians, in particular, face another problem that the chefs do not. If a chef’s recipe is revealed to the world, that does not detract from his reputation, and only other professional chefs are likely to be able to use the information. But if a magician’s trick is revealed, his reputation suffers; in fact, a little bit of the mystery is taken away from the entire profession.

In one notorious example, a series of 1990s television shows with the self-explanatory title, Breaking the Magician’s Code, won big audiences by revealing the secrets behind classic illusions. One magician complained that the shows were “peeing in everybody’s cornflakes”. But the magicians’ social sanctions were powerless to prevent television executives from exposing their secrets, and legal challenges to the programme did not succeed.

Loshin’s work is a reminder of how idiosyncratic intellectual property rights can be. Idiosyncrasy is not easy for economists to deal with, but if we want to understand the intangible economy of ideas, it’s a trick we shall have to master.

Published at ft.com, subscription free.

Cricket critique

Dear Economist,

As an Englishman who has been living in Chicago for five years, I remain perplexed by baseball, a game that lacks cricket’s sophistication. However, I am unable to persuade my American friends to take cricket seriously. They lack the patience for a game that takes five days and may end in a draw. Is there an economic justification for cricket’s superiority?

Andrew, Chicago

Dear Andrew,

Howard Wall, now a research director at the Federal Reserve Bank of St Louis, faced the mirror image of your situation: he worked for five years in London. Those years resulted in the definitive survey of the economic benefits of cricket versus baseball.

Reviewing the literature, Wall cited such out-of-print classics as Keynes’s General Theory of Employment, Interest, Money and Cricket, and charted the debates between the Marylebone School and the Polo School. But such debates were inconclusive without modern econometric techniques.

It was left to Wall to end the debate with a statistical analysis demonstrating that the typical baseball-playing nation enjoyed a total of more than 180 per cent economic growth between the years of 1960 and 1990, compared with just 60 per cent cumulative growth for the typical cricket-playing nation.

At first glance, then, your American friends seem to be right. However, since Wall’s analysis was published by the Royal Economic Society, India has enjoyed a sharp increase in its growth rate while one of the world’s leading baseball powers, Japan, has entered a long slump. It seems that given enough time, cricket will produce a result eventually – something all Englishmen instinctively appreciate.

Published at ft.com, subscription free.

13th of October, 2007Dear EconomistComments off

Getting to the starting line

I have an article up at Forbes.com for part of their package on “The American Dream”. I argue that America isn’t the land of opportunity that I like to think it is:
Who could argue with the idea that America is the land of opportunity? Since the country was born, millions of desperate immigrants have fled poverty, war and oppression to become citizens of the land of the free. America’s entrepreneurial culture is famous: It’s easy to take risks, start a new business. Anyone can become the next Bill Gates.
It is one of the touchstone beliefs that makes America what it is. And as an admiring outsider–I am English, although my daughter was born in Washington, D.C.–I’ve always found it compelling.
There’s just one problem: On one very important measure, America offers less opportunity than almost any other rich country. The real lands of opportunity are places like Canada, Finland and especially Denmark.
The measure I’m using is hard to calculate but easy to understand: How much of your parents’ income rubs off on you? If your father was rich at the age of 40, how likely is it that you will be rich at the age of 40? And if he was poor, are you also doomed to poverty?

Continued on Forbes.com, subscription free.

10th of October, 2007Other WritingComments off

Lost in Music

My troubles began while I was tidying up my CD collection, the decaying fruit of a misspent youth. I don’t mean alphabetising it, merely sorting through the piles of scratched silvery discs and putting them back into their cases. The process reminded me just how much music I don’t listen to, simply because of the archaeological dig that would be required. And so I started to think of copying all this music into some wonderful electronic box, and chucking the CDs away.

After a bit of research, I now realise that I have a dizzying range of choices – media PCs, iPod docks, dedicated music servers and wireless “bridges”. Don’t ask me to begin to enumerate the pros and cons, although it seems clear that most of them do things with music that it would have been hard for most of us to imagine 10 years ago. The human response is bewilderment. The economist’s response, of course, is “I wonder how many of these gizmos are in the inflation statistics?”

When I was a boy, there were no CDs. (The CD is 25 years old this year; The Visitors, by Abba, was the first one produced.) The original CD players were ludicrously expensive, so not many people bought them. Only when the price came down did people embrace the CD format.

That makes things difficult for the bean-counters who compile the inflation statistics. The Office for National Statistics (ONS) sends surveyors out to the shops once a month; the surveyors take a note of the prices; someone at the ONS adds up all the prices, and we see how much inflation has taken place in the past month. CD players have been falling in price and improving in quality for years, which should show up as a contribution to lower inflation.

But it is precisely when the price falls and quality improvements are most dramatic that they make little or no impact on the inflation statistics.

Continued at ft.com, subscription free.

Comedy Conundrum

Dear Economist,

As a keen silver surfer, I find YouTube an excellent way to revisit comedy favourites such as Monty Python and Peter Cook and Dudley Moore. I feel guilty watching pirated material, but what really puzzles me is why people post this material for my delectation. Can you explain?

O. Grizos

Answer at ft.com, subscription free.

6th of October, 2007Dear EconomistComments off

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