• Salamander ant prey

    The Big Impact of a Little Salamander

    Apr 9 • Economic Thinkers, Environment, Government, Lifestyle, Regulation, Thinking Economically • 62 Views

    The woodland salamander made me think of Adam Smith.

    In North American forests, wherever it is dark and damp, under a rock or a log, a very hungry salamander could be devouring her daily diet. Eating 20 ants, 2 flies or beetle larvae, and maybe a half of a springtail, she can be called a voracious predator.

    Woodland Salamander and Greenhouse Gases

    From: US Forest Research Station, March 11, 2014.

    Although the woodland salamander is only several inches long and weighs less than an ounce, she might have the ability to save the world. The reason is that she primarily eats “shredding invertebrates.” Because the bugs that are shredding invertebrates decimate and then consume teeny bits of leaves, they unsettle the forest leaf litter that might have remained covered by wet debris and then reabsorbed into the soil. Unsettled, the litter with its high carbon content enters the atmosphere as does some methane. The shredding vertebrate could be a big source of carbon emissions.

    Here is where the salamander comes to the rescue. Almost all of their prey are “shredding invertebrates.” Researchers in one study have now hypothesized that the more bugs salamanders consume, the lower the level of greenhouse gases. And according to a recent study, based on a small scale reproduction of the phenomenon with a control group, the impact could be considerable because there are lots of woodland salamanders.

    Observing the dynamics of a market system during the mid-18th century, Adam Smith explained how participants naturally and productively interact. So too with salamanders and their eco-system.

    And finally, 2014 is the year of the salamander.

    Sources and Resources: Providing abundant and interesting detail, a NY Times article summarized recent salamander research. If though, you would enjoy seeing the research on which the article is based, I recommend this Welsh/Best paper and the USDA forest service blog.


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  • Paying for citizenship and deficit reduction

    Unusual Ways to Achieve Deficit Reduction

    Apr 8 • Behavioral Economics, Demand, Supply, and Markets, Developing Economies, Economic Debates, Economic Thinkers, Government, Innovation, Labor, Macroeconomic Measurement, Thinking Economically • 63 Views

    Hoping to diminish their country’s deficit, last year, Malta’s President and Parliament decided to sell citizenship. The price tag is $891,000 and the perk is that Malta is in the EU. Consequently, you get an island home with a back door leading to the European Union. That means easy travel to the other 27 member states as well as to the 69 countries that offer visa free entry to EU citizens. Malta has contracted with a consulting firm to vet applicants. The firm charges a $95,000 application fee and gets a commission for every approval.

    In the Caribbean, St. Kitts and Nevus, Antigua and Barbuda and Dominica also have citizenship price tags. For St. Kitts and Nevus, you could give $250,000 to a retired sugar workers fund or a $400,000 real estate donation.

    Paying for US citizenship actually has been proposed by Nobel Prize winning economist, Gary Becker. In a Wall Street Journal opinion column, he and Edward Lazear suggested that people pay $50,000. Assuming we would continue at an annual rate of one million legal immigrants, a $50,000 per person fee would raise $50 billion. Becker and Lazear like the idea because of its market-based approach.

    Currently we do have a much smaller program. The US will exchange 2 years permanent residence and citizenship in 5 years for a $1 million investment in a business with 10 or more people or $500,000 targeting an economically depressed area.

    Our bottom line? A market-based solution to the immigration debate deserves some consideration. With deficit reduction one of its positive externalities, paying for citizenship has potential.

    Sources and Resources: Between Slate and the NY Times, you can get a pretty good description of Malta’s “golden passport” program and its broader implications. Then, trying to take it a step further, Becker and Lazear provided a new approach that deserves some debate.



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  • gender gap women's sports and March Madness

    Does It Matter That Men Boast?

    Apr 7 • Behavioral Economics, Demand, Supply, and Markets, Economic Growth, Gender gap, Innovation, Labor, Tech, Thinking Economically • 76 Views

    Teaching at a girls’ school, I continually run into the problem of modesty. My women know the answers and yet go to the board saying they might not be right.

    Now, an academic study from researchers at Columbia, Northwestern’s Kellogg School and the Booth School at Chicago have quantified the impact of women’s tendency to understate their potential while men overstate what they can do.

    Limited to the lab, the experiment’s design guaranteed no gender performance differences. “Employers” knew what they were looking for as did the “job candidates.” To mimic the real world and create incentive, the “employers” were paid for selecting the best candidates as were the “employees” who got the most jobs.

    What happened?

    There were several scenarios. One conveyed no information; people just knew gender. In the second scenario that the researchers called “Cheap Talk,” job candidates were supposed to self-report their results. Then, in the third twist, actual test data was presented to employers.

    In each instance the results reflected the “employer’s” confirmation bias. If he or she (male and female!!) thought the male would be more able, then that person hired the male, thereby validating the preconception. Consequently, in the first 2 “rounds” of hiring, whether based on no information or self-reporting in which the men inaccurately inflated their ability, the women were half as likely to get the job. Perhaps even more unsettling, even when presented with hard data, still more men were selected.

    In most hiring decisions, “employers” prior beliefs were disproportionately weighted.

    confirmation bias and hiring men

    From: “How stereotypes impair women’s careers in science”

    Battling confirmation bias becomes even more daunting when industry norms reinforce the bias. Described in yesterday’s NY Times article on tech gender bias, male attitudes demean women. As a result, they have little incentive to change their behavior. It was encouraging, though, to read about how women in technology have confronted the problem and are fighting the battle by starting their own firms and challenging inappropriate tweets, apps and less obvious but equally egregious behaviors.

    As a behavioral economist might say, the confirmation bias that social norms have supported is gradually changing.

    Sources and Resources: Especially having just read the NY Times Business Section lead article, “Technology’s Man Problem,” I recommend and especially enjoyed, “How stereotypes impair women’s careers in science.”



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  • Amazon and Innovation

    What Happens When 1-Click Meets a Barcode?

    Apr 6 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Economic History, Households, Innovation, Labor, Lifestyle, Tech, Thinking Economically • 66 Views

    It’s almost like 1-click and the barcode had a child.

    1-click diminished the friction of an online purchase. Described in The Everything Store, it let Jeff Bezos increase revenue by making the purchase process easier. And, once Bezos got his US patent, competitors could not copy the innovation.

    By contrast, using scanners with barcodes was an innovation that was supposed to spread since IBM was the originator. It was a natural for supermarkets. Keeping instantaneous track of inventory, moving the checkout faster, eliminating the price sticker on every item all meant land labor and capital could be used more efficiently. Predictably, others adopted it in stores, in factories, post office sorting facilities and libraries. The workplace was the one common denominator.

    Now, Amazon is bringing the scanner to our homes.

    With a home scanner that they call the Dash, Amazon is combining the benefits of 1-click and barcodes. Just scan the barcode on an almost empty milk container or use the Dash’s microphone and the item appears in your grocery list. Then, again minimizing friction, Amazon lets you “1-click” at your computer and have it delivered to your doorstep.

    What happens when 1-click meets the barcode scanner? In product markets, the transaction cost decreases because of less friction and in factor markets, there is more productivity.

    Sources and Resources: The media, at pcmag and wsj, for example, have been talking about the Dash. Meanwhile, at econlife, we have looked at one-click, Amazon Prime and barcodes.

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  • Fast and Slow Stock Market Trading

    Fast and Slow Stock Markets

    Apr 5 • Businesses, Demand, Supply, and Markets, Economic Growth, Economic History, Financial Markets, Innovation, Macroeconomic Measurement, Regulation, Tech • 71 Views

    Goldman Sachs is asking $30 million for a firm that, 14 years ago, it purchased for $6500 million ($6.5 billion).

    The story (sort of) starts 222 years ago.

    Wall Street was where our first Congress met, where Alexander Hamilton lived (several blocks from Aaron Burr’s home), and where the new nation’s financiers congregated. Gathering at coffeehouses or under the buttonwood tree in front of 68-70 Wall Street, these gentlemen traded bonds issued by the new government and an assortment of other commodities.

    As their trades multiplied, a more formal auction evolved in which buyers no longer needed to identify the sellers. They just needed the people in the middle who could match them. Specializing in certain securities, the middle men (and yes, they were men) bought, sold and priced the stock for specific companies.

    Called specialists, the 19th and 20th century descendants of the men who traded under the buttonwood tree, were supposed to “make” orderly markets in which prices eased up and down. If there were insufficient buyers, then the specialists would take their place. And no, they were not doing every one a favor when they maintained orderly markets. they too expected to make a profit.

    I can recall visiting the NYSE not so long ago when we could see “trading posts” on the floor where the specialists (now called market makers) were based. Go to one post and you could buy IBM, another might trade General Motors, and a third Johnson and Johnson or GE. Today, those trading posts are still there but they are no longer the vortex of NYSE trading. Computerized trading means we really do not need people to match buyers and sellers in stock markets. Nor perhaps do we even need market makers who determine appropriate prices.

    And that returns us to Goldman Sachs. They had purchased Spear, Leeds & Kellogg for $6.5 billion because they were market makers and executed trades. Now, though, as technology has pretty much replaced what they do, the value of Spear, Leeds has plunged to $30 million and maybe less.

    Our bottom line? We need financial markets so that firms can raise money, individuals can invest savings, governments can borrow…the list could be endless. Whether human or computerized, dependability, integrity and liquidity have been essential.

    One of many that were on the floor of the New York Stock Exchange before “electronics” arrived, this is trading post #12 where Applied Digital Data, Union Camp, and the Sweets Co. Of America traded.

    NYSE stocks markets trading post

    A detail that shows the share prices more clearly:

    NYSE trading post stock quotes

    Sources and Resources: Providing some history, the NY Times just reported that Goldman wants to sell Spear, Leeds & Kellogg but for more detail and the source of an excerpted paragraph above, my book, Econ 101 1/2 tells the whole story. It was tough to find a good historic picture of the NYSE so I finally used a trading post that was given to the University of Chicago.

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