Dear Economist

Who should I support in the World Cup?

Dear Economist,
I am an Indian but my country never qualifies for the World Cup. I usually support the Netherlands because I am a fan of Dutch football. But this year is different, because I work in England, pay my taxes here and feel that if England wins the World Cup it will lead to positive externalities for me. My boss may go easy on me, the general mood of the country will lift and even the looming spending cuts may feel more bearable. But should I sacrifice my love of Dutch football for the sake of my stake in the British economy?
Deepan Banati, London

Dear Deepan,

I am glad to see you are taking the beautiful game seriously, but puzzled that you are so determined to impale yourself upon the horns of an imaginary dilemma. You seem to think that supporting England and supporting the Netherlands are substitutes with sharply decreasing returns – in other words, you can only afford to support one or the other. I do not really understand why this should be true.

Until the two teams actually meet, you can support both. This has many merits. You have a real interest in twice as many matches, for example, and are more likely to have some wins to celebrate. If the teams do meet, the situation will be slightly more difficult. But this cannot happen until the semi-finals at the earliest. And it may not happen at all: neither England nor the Netherlands are exactly permanent fixtures in the World Cup’s last four.

In the unlikely event that your divided loyalties are tested, find a Dutch pub and cheer the Dutch with abandon. At work the next day, resume the demeanour of an England fan, whether celebrating victory or heroic failure in a penalty shoot-out.

Economists always assume that people may hide their true preferences; this is one assumption to which you should adhere.

Also published at ft.com.

How do I set myself up as a photographer?

Dear Economist,

I consider myself a good documentary photographer, but my full-time job is in another field. I want to start a career in wedding photography, so I need to build a portfolio. But how?

I tried to offer a cut-rate service that basically covers the production cost. No luck.

My theory is: this is a glamorous business, like Hollywood. If you are the client, you probably won’t worry about cost unless you’re on a shoestring. You won’t trust a new start-up on a unique event. If you are on a shoestring, you probably won’t look at a professional photographer’s price list.

I have considered offering myself as a free assistant or second shooter. But as you may notice, wedding photographers are like plumbers – they have quite a local base. I doubt they would want to help out a competitor in their own back yard. So how do I get started?

Camera for hire

Dear Camera for hire,

Actually, your business is more like hedge fund management or heart surgery. Nobody goes for a cut-price heart surgeon.

You really have two options. One is to take photographs at friends’ weddings. You don’t need permission from a rival photographer, you just need permission from a friend.

But I have a more radical suggestion. To win business you need to demonstrate confidence in your expertise. Tell prospective clients that you will pay them for the privilege of taking photos at their wedding, and that you’re confident you’ll make money anyway because they will want to buy your prints. Not only does this scheme give them some compensation if you prove to be an amateurish snapper, but more importantly it sends a signal of your self-confidence. A true incompetent would never be able to afford such a deal. I only hope you are as good as you say you are.

Also published at ft.com.

Does free internet access really exist?

Dear Economist,
While on a brief break in Devon, I was sitting in a coffee shop that provides free wireless internet access. As the lunch hour approached, the proprietor asked me to vacate the table for four because he wanted it to be free for a lunch party. This made me feel as though he didn’t really appreciate my being there – even as a paying customer.

Should the coffee shop offer wireless internet access if it isn’t willing to accept the opportunity cost associated with it?

Jon Upton, Paris, France

Dear Jon,

As a man whose espresso is rarely complete without a laptop alongside it, I sympathise with your plight. But I also sympathise with the difficulties of the café owner. The café, like many businesses, offers free goods and services bundled together with the products it sells. You are charged for your coffee, but not for the use of a cup and saucer. Sugar is free.

The trouble is that sometimes these services can be very costly to provide. At lunchtime the opportunity cost of letting you take up a table for four is substantial. Sometimes restaurants cope with this by charging high premiums for products that go hand in hand with long sittings – wine, starters and desserts. At other times they are forced to be more direct.

The wireless access, cheap to provide at any time, is a side-issue. The difficulty is that people like you take it as an invitation worth abusing. Perhaps the proprietor should switch it off at lunchtime. Perhaps he should forewarn customers with a little sign.

But should that be necessary? There are tacit agreements governing the fair use of these “free” resources. If you had walked off with your cup and saucer, or half a kilo of sugar, the owner would have challenged you, sign or no sign. Would you then have felt unwelcome? You would have been unwelcome for a reason.

Also published at ft.com.

Can I press my char into ironing for free?

Dear Economist,
My ironing lady – housebound and bored – has taken to phoning me up and begging me to bring round my bed linen for ironing. As I return to pick it up again, proffering a pair of crisp £20 notes, I quip: “But Sheila, aren’t I providing occupational therapy and shouldn’t you be paying me?” She laughs, pocketing the banknotes, and glows with satisfaction as I take my pile of pillowslips. It is my social duty to continue this relationship, but why do I feel I am the one being flattened?
Flora Fortis, London

Dear Ms Fortis,

You are indeed providing great satisfaction to a vulnerable woman. But don’t feel too smug. You seem to be imagining that you could demand free ironing, or even charge your ironing lady for the loan of sheets that she wants to iron. I rather doubt this.

Naive game theory suggests that since Sheila enjoys ironing so much, you can threaten to withhold your custom and she will agree to iron for nothing. But to analyse the situation properly you must consider Sheila’s outside options. There are many dirty sheets in London, and she will not find it hard to secure other customers. You, on the other hand, will have to travel a long way before you find another ironing lady so cheerful.

Sheila’s satisfaction with her job is surely not unique. I know we talk of work as a terrible chore, something we do only for cash. Yet in reality, many people enjoy their jobs and get paid to do them. The leisure time “enjoyed” by the unemployed is not enjoyable at all. It is a crushing experience, especially on top of the loss of income.

In a world where rumpled linen is in plentiful supply, Sheila’s enjoyment of ironing is simply her good fortune. It is not something you will be able to parlay into cheap laundry services.

Also published at ft.com.

Is it worth trying to get a good degree?

Dear Economist,
After years of hard work I am about to finish my degree in economics. Maybe I shouldn’t say “years of hard work”. I skipped quite a lot. Now I’m worried that in the middle of a recession, I’m going to graduate with a lousy degree. Will reading “The Undercover Economist” get me through? Or should I be in the library?
George, London

Dear George,

Flattery will do you no good: I shall give my usual frank advice. You should be worried about graduating in the middle of a recession. I’ve written before about the research of Till Marco von Wachter, who estimates that graduating in a recession depresses your earnings for many years thereafter. You should also be worried about graduating with a bad degree, but not for the reasons you think.

Researchers have known for a long time that graduates with first-class degrees are more likely to end up with a job or a postgraduate place than graduates with third-class degrees. The question is whether this is because of the degree class itself, or because both employers and examiners are independently picking up the same traits. It’s hard to say, because employers – with access to references and interim test results – may have much more information than researchers do.

New research by Giorgio Di Pietro looks at data from an unnamed UK university. Di Pietro compares candidates with identical – or very similar – test scores, but who (because of the arbitrariness of the dividing line, or because of the discretion of the board of examiners) are awarded a different class of degree.

The good news is that once your underlying scores are taken into account, your degree class seems to make no difference to your chance of a job or further place. The bad news is that no matter how hard you work from now on, your fate has probably been sealed already.

Also published at ft.com.

Are shoes an inelastic fashion accessory?

Dear Economist,
We need shoes come rain or shine and the more shoes we have, the better prepared we are for the unpredictable circumstances we face in our daily lives. Because of this, we should buy shoes no matter how much they increase in price, because their demand will always exist – we can’t walk around barefoot. Perhaps I’m just trying to convince myself that £60 on a pair of shoes is a solid investment.
Shoe-shopper

Dear Shoe-shopper,

I am unschooled in The Way of the Shoe and hesitate to offer my usual unambiguous advice, but I draw the line at the use of the politician’s favourite euphemism, “investment”. I regard my lunch money as well spent, but let’s not pretend that my lunch is a hundred shares in General Electric, shall we?

To answer your question, shoes are “income inelastic” if you do not cut back much on shoes when your income falls. They are “price inelastic” if you do not cut back much on shoes when their price rises. Something tells me you think shoes are inelastic in both respects.

I would argue that a more pertinent term here is “diminishing marginal utility”. The first pair of shoes protects your feet. All subsequent pairs of shoes are merely variety. I write without fear of contradiction when I suggest that the more shoes any one person has, the more time each pair will spend at home in the shoe cupboard.

In short, whether you are wise to spend £60 on new shoes rather depends on whether you now have no shoes (the scenario you gesture towards) or whether you have a spare bedroom full of them, which I fear may be the truth.

Let’s face it, you don’t want advice from me. Why don’t you look to Carrie Bradshaw, the Sex and the City character who once explained: “My new shoes shouldn’t be punished just because I can’t budget.”

Also published at ft.com.

How can we get big wedding presents?

Dear Economist,
My partner and I are ready to register for gifts and we are seeking the most efficient way to do it. Most registries allow any gift to be returned to the store for cash. Additionally, one can often find 20 per cent coupons for this store (meaning that one can return a gift worth $100 and then buy it back with a coupon for $80). Which gifts should we register for? I am worried that if we register for lower-priced gifts, then people who have a higher willingness to pay will take advantage of the consumer surplus and buy a cheaper gift. Or should we just register for the gifts we want because the opportunity cost spent returning gifts and buying new items will be too high?
Meir, New York

Dear Meir,

Many congratulations! Not on your nuptials of course, which I presume are imminent –although you do not mention them – but on your single-mindedness. Weddings can be expensive, and it’s important to focus if you are to stand any chance of turning a profit.

You’re missing a trick with this coupon business. You need to circulate coupon details along with your demands. That way, someone willing to spend $80 will have to buy a $100 gift – because they know, and know you know, that the coupon was available. You can then parlay the $100 into a $125 gift if you wish.

As for the price range you choose for these gifts, best to offer a broad selection. This will maximise the extraction of consumer surplus from your guests, who will have varying willingness to pay. This is one splendid occasion when people will not try to secure a bargain: you can be sure they will buy the flashiest gift their budget allows.

My only puzzlement is at this talk of opportunity cost. Enjoy yourself! Is there any more enjoyable part of a wedding than squeezing money out of the guests?

Also published at ft.com.

Should I forgo my holiday to vote Tory?

Dear Economist,
Would it be very wrong to go on holiday and miss voting in the forthcoming general election? We have an excellent constituency MP (Tory) who has a reasonably safe seat. I don’t agree with all his party’s policies, such as they are, but he has an excellent voting record and works very hard. I’d like to see him retain his seat – but not as much as I’d like to go on holiday.

Last election, the Liberal Democrats came second in my constituency and Labour came third, with a turnout of 70 per cent. If my vote were material in preventing a Labour government, I would be prepared to forego the holiday. Should I?

Unmarried UK Voter

Dear Unmarried Voter,

The country is fortunate indeed to have voters like you. Many people choose not to vote because of far smaller inconveniences – that it is raining, or that every local candidate is an uninspiring stuffed suit. (Next time, though, might I suggest registering to vote by post?)

I think you can cut yourself some slack. In the vanishingly unlikely event that your vote does make the difference between Tory and Labour government, the margin of victory will be so fine that the joy of Tory voters will be precisely balanced by the misery of Labour voters. For this reason I believe you need not vote at such great inconvenience to yourself. Let us consider your own preferences instead. The Conservatives are far more popular than at the last election, while Labour’s popularity has slumped. Unless there is some local scandal you have not mentioned, there is almost no chance that your MP will lose a safe seat while swimming with a favourable tide. The chance your vote will matter locally must be much less than 1 per cent. If you value that more strongly than a vacation, you’re a committed voter indeed – unnervingly committed. Sounds to me like you need that holiday!

Also published at ft.com.

Should I bet against my party winning?

Dear Economist,
As canvassing for the general election gathers speed, I’ve been thinking about the gambling possibilities. Without going into specifics, I’m considering placing bets on the rival team’s victory – as insurance in the event of having to live in a world not entirely to my liking.

Would this be psychologically effective, or am I wasting my money? What price should I place on my political ideals?
Justin, south-east London

Dear Justin,

In principle, your plan makes sense, but the practicalities are more troubling. One possible difficulty is “habituation”, our tendency to adjust psychologically to what we have. Some research on happiness economics suggests that people get used to extra money more quickly than they get used to ongoing situations such as a long commute. I could imagine you winning big when your party loses, but then quickly taking the extra cash for granted, while the smug face of the wrong prime minister infuriates you every day. Would your win have compensated you in any significant way?

A more basic problem is that many people object strongly to losses – a phenomenon called, unmysteriously, “loss aversion”. The idea is that a gain of £10 may be mildly pleasant, while a loss of £10 is infuriating.

Your plan guarantees a loss either way.

I worry that if you won your bet you would find it was scant compensation for your party losing the election, while if your party won the election, the celebrations would be ruined by your knowledge that you lost the bet.

If you do decide to bet, you are best placed to judge how much compensation is necessary. You clearly find the outcome more significant than I do. And a word of warning: you imply that if your favoured party wins the election, the world would be entirely to your liking. I can assure you that this possibility is remote.

Also published at ft.com.

Help! I’m trapped in a spiral of superstition

Dear Economist,
When I sneeze, people often say to me – I know not why – “bless you”. I do not reciprocate when others sneeze, for I refuse to subscribe to any form of superstition.
It follows that my well-wishers clearly are superstitious. Therefore, my exceptional politesse dictates that I ought to offer them a blessing whenever they expel extraneous sinal mucus.
But perhaps the whole of humankind believes that everyone else is superstitious and so this absurd tradition continues between people who ought to know better, each of them fearing that they will cause offence. It is an awful superstition-fearing spiral. How, dear economist, to break out of it?
Hugh Costello

Dear Hugh,

There seem to be competing explanations for the “bless you” convention – that the sneeze has driven out an evil spirit, that the blessing wards off the bubonic plague, or even that a blessing restarts the heart after the sneeze stops it.

You conclude that anyone who says “bless you” either believes one of these things, or is indulging another person’s presumed superstition. A more likely explanation is that saying “bless you” sends a signal that you have noticed another person’s existence. It is a weak signal, but not saying “bless you” sends a strong signal that you do not care to acknowledge the presence of another human being.

Here is a parallel. When I wish a colleague “good morning” it is not because I believe doing so will cause a good morning to spring into existence. It is because not saying “good morning” is rude – doubly so if she has said “good morning” to me.

You seem a literal-minded fellow, Hugh. When you addressed me as “dear” economist, were you expressing romantic feelings for me? If so, I am afraid I have some bad news.

Also published at ft.com.