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Archive for July, 2009|Monthly archive page

Why is Supply and Demand so confusing?

In critique, popular economics, reblog on July 29, 2009 at 11:49 am

Scott Sumner, professor of economics at Bentley University, wrote an honest-to-goodness article about the general confusion that students, teachers and business journalists have in thinking about supply and demand. I found the article through the site of Greg Mankiw, the author of the textbook which Sumner refers to in this illuminating article. Consider this:

Question:  A survey shows that on average 100 people go to the movies when the price is $6 and 300 people go when the price is $9.  Does this violate the laws of supply and demand?

Very, very few can answer this question, especially if you ask for an explanation.  Even worse, I think there is a perception that there is something ‘tricky’ about this question, something unfair.  In fact, it is as easy a question as you could imagine.  It’s basic S&D.  It’s merely asking students what happens when the demand for movies shifts.  I cannot imagine a less tricky question, or a more straightforward application of the laws of supply and demand.  In the evening hours the demand for movies shifts right.  Price rises.  Quantity supplied responds.  What’s so hard about that?  And yet almost no student can get it right.  Our students enter EC101 knowing one of the two things they need to know about S&D, and they leave knowing one of the two things they need to know about S&D.  Maybe instead of having them memorize mind-numbing lists of “5 factors that shift supply,” and “5 factors that shift demand,” we should just tell them to read something that will explain what economics is all about, something that portrays economists as detectives trying to solve the identification problem, something like Freakonomics.

Scott Sumner articulates one of my personal concerns in studying economics. I felt that the general concepts, when you really think about them, really lack the empirical basis of the natural sciences. I thought that a more comprehensive education would make the philosophy of economics indispensable to clarify abstract concepts like value, exchange, utility, price and demand. These terms never fail to confuse me, though what I like in general is how the universe of economics can be postulated in the form of a labyrinth.

The author criticizes the manner with which reputed publications talk about the subject. “I feel like something is wrong.  What they are doing is about as closely related to economics as astrology is to astronomy.”

The full article can be found here.

Related posts:
Economics post archive

Longlist for 2009 Man Booker Prize

In literary, reblog on July 29, 2009 at 8:57 am


The official website of Man Booker Prize has announced the judge’s longlist. The Man Booker Prize is one of the prestigious literary awards in the English-speaking world. Included in the list are A.S. Byatt and Nobel Prize winner J.M. Coetzee.

* Byatt, AS. The Children’s Book
* Coetzee, J.M. Summertime
* Foulds, Adam. The Quickening Maze
* Hall, Sarah. How to paint a dead man
* Harvey, Samantha. The Wilderness
* Lever, James. Me Cheeta
* Mantel, Hilary. Wolf Hall
* Mawer, Simon. The Glass Room
* O’Loughlin, Ed. Not Untrue & Not Unkind
* Scudamore, James. Heliopolis
* Toibin, Colm. Brooklyn
* Trevor, William. Love and Summer
* Waters, Sarah. The Little Stranger

Winners in the past are Margaret Atwood, Ian McEwan, Kazuo Ishiguro, Salman Rushdie, William Golding, Iris Murdoch, V.S. Naipaul, among others. See the archive of winners here.

The indie kid’s guide to classical music

In music, reblog on July 29, 2009 at 8:35 am

From The Guardian:

How do you listen?

What you need to do is close the curtains, take your clothes off, lie face down with your teeth sunk deep into the carpet. Then get your butler to sprinkle your buttocks with rose petals and put on the 16-plus hours of Wagner’s operatic tetralogy, The Ring, before he retreats, locking the door on you, until the bloody ordeal is over. Not really: what you need is peace, quiet and concentration. 

Music for kids: Muse and Chopin. Photographs: Yui Mok/PA/ Alfredo Dagli Orti/Corbis/Art Archive

Five downloads to get you started

Schubert: the Trout Quintet
Bach: Brandenburg Concertos
Mozart: Clarinet Concerto
Beethoven: Symphony No 9
Puccini: Madame Butterfly

Related post:
Music and Metaphysics

Five downloads to getyou startedSchubert: the Trout QuintetBach: Brandenburg Concertos

Flatland: a Romance of Many Dimensions

In book review, reblog on July 29, 2009 at 8:15 am

I learned about Edward Abbott’s 1884 novella about entities in the two-dimensional world from this video. The book is entitled “Flatland: a Romance of Many Dimensions” and is so eccentric I couldn’t imagine how the Victorian era received it. The video features Carl Sagan trying to explain how a person in a two-dimensional world can perceive an intruding entity with three dimensions. The book also talks about how one flatlander journeyed to space and was branded a madman when he returned to Flatland to report what he had seen about other dimensions. Flatland’s relationship to ours is, of course, the same as our relationship to the four-dimensional realm.

Hayao Miyazaki’s “Ponyo”

In film, reblog on July 29, 2009 at 8:05 am

From biblioklept:

Ponyo tells the story of a little fish-girl (girl-fish?), a mermaid who escapes from her mad-scientist father and meets a boy named Sosuke. After tasting some of Sosuke’s blood, Ponyo begins to morph into a human. However, her transmutation causes bizarre and violent weather, including a giant tsunami resulting in a massive flood; even the moon starts to pull out of orbit. Sosuke and Ponyo navigate this surreal post-flood world, searching for Sosuke’s mother Lisa. The tale of these children is sweet but never maudlin, and like most Miyazaki films, Ponyo taps into sentimentality and pathos without ever becoming mawkish.

Visually, Miyazaki employs a sketchy, watery style here, painted in beautiful pastels and flashy complimenting brights. The look of this film is a significant departure from the fine detail and rich heaviness of Miyazaki’s masterpiece, Spirited Away (Sen to Chihiro no Kamikakushi), and might disappoint some, but we thought it was both beautiful and fitting. Of course, we were watching a pirated version that someone lovingly and bravely shot in a theater, undoubtedly inferior to the spectacle we expect from the theatrical release.

See original article here.

Vampires are good for the economy

In popular economics, reblog on July 25, 2009 at 4:46 pm

Just as I have thought. Vampires work wonders to the economy, if their population is managed effectively.

In Dennis Snower’s Macroeconomic Policy and the Optimal Destruction of Vampires (1982), the optimal production of stakes should make the supply sufficiently low to allow the regeneration of vampires (see my An economic policy on vampires post).

Michael Ian Black has some amateur arguments in My Custom Van. Ecocomics sums this up:

…vampires would be more likely to attack individuals of lower socioeconomic backgrounds, who have less adequate means of protecting against an attack. This, he argues, would serve to reduce spending on social welfare programs, such as Medicaid, since more lower-income individuals enroll in these programs.

The same blogger adds his own insights:

…there are other industries that have the potential to grow. One is, of course, the insurance industry. Much like with supernatural disaster insurance, people will want compensation in the event of vampires destroying their homes, their cars, and most of all, their pets. And what about insurance against actually becoming a vampire? Vampires have things to buy. They still live in homes, which means they have mortgages to pay, utilities bills, car insurance payments, etc. Unlike zombies, vampires do not just walk around lusting for brains and losing body parts. They are actually capable of blending in with humans, holding intelligent conversation, and engaging in rational thought. They are also capable of deriving enjoyment from television, music, books, clothing, and others. Therefore they are likely to make some purchases for entertainment and luxury in addition to necessity.

See the complete article here.

Related posts:
An economic policy on vampires

Health care is not a right

In critique, philosophy, reblog on July 25, 2009 at 8:25 am

To make medicines and health services available to all citizens, care of the government — any sane person would think that this is moral and well-intentioned. People who oppose the health care plan in America reason out that while indeed it is moral and well-intentioned, it is impractical. As of this date, “the US spends more on health care than any other country” (Financial Times).

Dr. Leonard Peikoff, who is heir to Ayn Rand’s intellectual estate, says that the health care plan, or the concept of socialized medicine for that matter, is impractical because it is immoral. The opponents of the plan are therefore merely scratching the surface. Peikoff argues: Health Care Is Not A Right. The reason is as follows:

Now our only rights […] are the rights to life, liberty, property, and the pursuit of happiness. That’s all. […]

Why only these? Observe that all legitimate rights have one thing in common: they are rights to action, not to rewards from other people. The American rights impose no obligations on other people, merely the negative obligation to leave you alone. The system guarantees you the chance to work for what you want—not to be given it without effort by somebody else.

The right to life, e.g., does not mean that your neighbors have to feed and clothe you; it means you have the right to earn your food and clothes yourself, if necessary by a hard struggle, and that no one can forcibly stop your struggle for these things or steal them from you if and when you have achieved them. In other words: you have the right to act, and to keep the results of your actions, the products you make, to keep them or to trade them with others, if you wish. But you have no right to the actions or products of others, except on terms to which they voluntarily agree.

The market for prostitution

In popular economics on July 24, 2009 at 10:38 am

(This post is a continuation of More Sex is Safer Sex).

In this age of epidemic, “multiple partnerships save lives” (Steven Landsburg). How? Because it eliminates the market for prostitution, which is a venue for the spread of the epidemic.

Let’s imagine a community where women are required to sleep only with their husbands. But husbands are more likely to sleep with women other than their wives. The monogamous policy, however, prevents them from sleeping with the wives of other men. Hence, there emerges a prostitution market, which supplies more sex and satisfies the demand for more partners in a monogamous community.

For simplicity’s sake, let’s say the population of this community is 100. There are 50 men and 50 women. There are only 10 singles (5 males, 5 females), the rest are married. Let’s say monogamy is preached more strictly on wives, and culture has made a policy exemption on husbands due to their sexual instincts. Let us assume that the natural propensity of husbands to sleep with another woman is 1 extra partner per year. Given the number of single men, the number of husbands is 45. The number of wives is also 45. But if each husband, based on natural necessity, sleeps with 1 extra partner per year, and they’re not allowed to sleep with the wives of other husbands, they will resort to the 5 single females. Since there is very few and precious supply of extra sex, a market for prostitution arises because of the bargaining power of the single females. Assuming these 5 all engage in prostitution, they will have to meet the demand of 45 husbands and will need to sleep with multiple partners throughout the year. If all husbands must be satisfied, the average number of each prostitute’s customer is 9 husbands a year.

Now let’s say one husband (1% of the population) is HIV positive. He infects one prostitute, who in turn infects 8 more men. The 9 infected husbands will infect their 9 wives. If each husband tries the other prostitutes, then the other husbands and wives are also infected.

Now if we allow the 45 wives to have multiple partners and throw monogamy out of the equation, the husbands can sleep with other wives. Hence the total number of females in the population that are potential sexual partners becomes 50. If there are 50 women that can supply the demand of 45 husbands, then the bargaining power of females in providing sex is reduced, and hence no prostitution market will form, and no venue for the rapid spread of the epidemic.

Related posts:
More Sex is Safer Sex
Reincarnation Bank

Economics and Global Climate Change

More sex is safer sex

In popular economics on July 24, 2009 at 10:06 am

The key to reducing the risk of sexually transmitted diseases is not lesser sex, but more sex. This is according to Steven Landsburg, a professor of economics who writes columns at Slate in the tradition of Levitt and Dubner’s Freakonomics and Tim Harford’s The Undercover Economist. He is also the author of More Sex is Safer Sex. For him, the AIDS epidemic is not worsened by promiscuity, but rather by monogamy, chastity and sexual conservatism.

I like the thinking style of Landsburg because he shows that what we think as common sense is in fact irrational. His solutions to social problems, like urban congestion, are often the reverse of our assumptions of correctness. His rhetorical skills show this pattern: “X, which is thought to improve Y, actually worsens it”. Here are some of his claims in the past, backed by economic theory applied on everyday life:

1. Parking your car is more environmentally destructive than driving it.
2. We shouldn’t aid Katrina’s victims too much.
3. Pornography prevents rape.
4. It makes more sense to play the lottery than to vote during elections.

He talks about the economics of faking orgasms. He applies the marginal analysis in discussing why people stand still on escalators but not on normal stairs. Tim Harford praised Lansburg for his unconvential wisdom. The meaning of “unconvential” in his case is his ability to attack popular assumptions.

In More Sex is Safer Sex, he argues that conservatism, chastity and monogamy help spread epidemic, and claims that increased sexual activity can help reduce the risk of AIDS. The argument runs thus:

Identifying key players. One, we have a person who is looking for sex. Two, we have a set of potential partners. We divide this set into two groups: the promiscuous ones and the conservatives.

Quantifying the risk of getting HIV. Now let’s say you’re looking for sex in a party. You spot four (4) potential partners. Let’s say two (2) of them are promiscuous (engaging in casual sex, sleeping with strangers or with more than one partner or husband, etc.), and the rest are conservative (either  monogamous, virgins, or just cautious and picky).

Since the promiscuous group is more likely to be HIV positive, and the set is divided into two equal groups, there is 50% chance of getting an unsafe match. Supposing, however, that the conservative crowd in the general population doubles the frequency of their sexual activity (e.g. instead of getting sex just once a year with a partner met in a party, they now have sex twice), you will find that their number in the set increases. Hence, when you step into a party, you are more likely to add two (2) more conservatives in the set of potential partners. Now you have six (6) potential partners, four (4) of which are conservatives and only two (2) are promiscuous.

This means the risk of having unsafe sex is now just 2/6 or 33%, and the chance of sleeping with a safe partner is 4/6 or 67%. That is why we say that more sex reduces the risk of AIDS because the probability of having sex with an HIV-positive partner is reduced from 50% to 33% given that the conservative crowd in the general population becomes more sexually active.

Landsburg’s advice: let the sexual conservatives have more sex. It’s more doable than preaching sexual conservatism to the promiscuous crowd.

The solution isn’t that simple if we put monogamy into the equation. I’ll save this for my next post, The Market for Prostitution.

Related posts:
Reincarnation Bank
Economics and Global Climate Change

The art of book vandalism

In history, reblog on July 23, 2009 at 1:11 pm

Many centuries ago in China, shortly before the construction of the Great Wall, Emperor Qin commanded that all books must be destroyed. The only ones excluded were useful manuscripts, like books on astronomy and agriculture. Jorge L. Borges wrote that in order for the leader to truly establish himself as the first emperor of the unified kingdoms of China, he must first erase history. The emperor prevented the forces that shattered this unity, in turn hastening the construction of the structure. For imaginative purposes, one could think of the Wall as being made of books instead of bricks, since the burning of books was totally in conjunction with the project.

Franz Kafka’s The Great Wall of China, a most exemplary piece showing the so-called “Kafkaesque process of non-arrival” (see John Updike’s introduction to Franz Kafka: the Complete Short Stories), speculates how the Chinese citizens were socialized into the project by having the entire educational system revolve around the notion of “building”. The most important skills were related to constructing something indestructible, in the masonic sense of the word.

(There is a legend that Emperor Qin ordered some 500 Confucian scholars to be buried alive, in response to some illustrious people who opposed his tyrannical ways.)

Borges, the librarian of the world, pursued the idea that books constitute the substance of the universe in The Library of Babel. That was the extent of his bibliophilia. This fictional essay is the first Borgesian piece that I ever loved. What was most astonishing is how he calls attention to the physical constitution of the book rather than the text. For him, even the pages and the binding are sublime.

Today, contemporary artists have found a lot of uses from the physical constitution of books. The pictures are from OffBeatEarth:

Below are promotional images for Anagram Bookshop in Prague, by Kaspen.