• Grit and excellence

    When Grit Helps You Excel

    May 1 • Behavioral Economics, Economic Debates, Education, Innovation, Sports, Thinking Economically • 124 Views

    Although Mozart had the ability to connect a specific note to any kind of sound, he was not necessarily born with perfect pitch. Because more people have the ability to recreate musical notes In countries where language uses tone for meaning, researchers have concluded the skill is teachable.

    Where are we going? To the importance of grit.

    The Best Spellers

    At the 2015 National Spelling Bee competition, the winning words were scherenschnitte and nunatak. Instead of just one, two words ended the contest because after 25 final rounds they had a tie. (Scherenschnitte or “scissor cuts”  refers to paper cutting design while a nunatak is a hill or ridge surrounded by but not covered by ice.)

    Preparing for a national spelling competition, you might have played word games, been quizzed, or plowed through lists of vocabulary. One study suggests the most effective method is the third. Solitary disciplined practice with specifically ascending goals had the best results. One researcher calls the approach deliberate practice framework.

    The Best Violinists

    At the Music Academy of West Berlin, it was possible to predict which violinist would become a music teacher, who would ascend to a symphony orchestra, and who would become famous. The key appeared to be solo practice. Among 30 Academy students, all started at 8-years old, by age 15 all wanted to become musicians, and all averaged 50.6 hours a week doing school-related practicing. The difference was what they did alone. Those who spent the most time practicing purposefully on their own were destined for fame. Like the spelling bee kids, solitary practice made the difference.

    Our Bottom Line: Grit

    The willingness to push yourself beyond an existing level of expertise through a consistent and potentially unpleasant practice pattern has helped musicians, chess players and athletes break through performance barriers. It works though only in activities that involve an articulated objective that someone can aim for and then surpass.

    Like me, you might be thinking, but what about creativity? As one Scientific American blog tells us, creativity leads us into unknown territory that can be messy, involve broad interests and require experimentation. Rather than deliberate practice, it takes a different kind of grit.

    Different kinds of grit make human capital better. Composed of knowledge and skill, better human capital motivates others to take the next step. As economists we can say that better human capital creates the positive externalities that can ripple far beyond where they began.

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  • Weekly Roundup The econlife.com economics news summary

    Weekly Roundup: From Bag Fees to Ambulance Meters

    Apr 30 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Economic Thinkers, Environment, Government, Health Care, Innovation, International Trade and Finance, Labor, Lifestyle, Macroeconomic Measurement, Regulation, Tech, Thinking Economically • 119 Views

    Weekly News Roundup

    self-driving cars Sunday 04.24.16

    The incredible impact of self-driving cars…more

    Weekly Roundup and Skyscrapers and business cycles Monday 04.25.16

    The significance of a new skyscraper…more

    Weekly Roundup and Plastic bag fees and bans Tuesday 04.26.16

    The benefits of bag fees…more

    Weekly roundup and coffee supply chain Wednesday 04.27.16

    The travels of a coffee bean…more


    Weekly Roundup and healthcare spending Thursday 04.28.16

    Where health care is cheaper…more

    Weekly Roudup and ambulance prices Friday 04.29.16

    Why Chinese ambulances resemble taxis…more

    Ideas Roundup

    • creative destruction
    • innovation
    • business cycles
    • externalities
    • Pigovian taxes
    • environment
    • globalization
    • entitlements
    • incentives
    • command economy
    • market system
    • demand
    • regulation

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  • Weekly Roudup and ambulance prices

    When the Price of an Ambulance Gets You Sick

    Apr 29 • Behavioral Economics, Demand, Supply, and Markets, Developing Economies, Economic Debates, Economic Thinkers, Government, Health Care, Regulation, Thinking Economically • 123 Views

    This was the headline in the Shandong News:

    The market, command and ambulance prices

    And this is the receipt. My arrow indicates the 3600-yuan ($550 or £380) price:

    How to decide ambulance prices


    Where are we going? To why it’s tough to regulate ambulance prices.

    Beijing’s Solution

    Because a typical person calling for an ambulance knows nothing about the expense, too many drivers gouge their clientele. In Shandong, that 3600-yuan charge for the ambulance was approximately half an average worker’s monthly wage and three times what a bus would have cost.

    Seeing the system was being abused, Beijing’s regulators decreed that ambulances, “be fitted with taxi-style meters in an effort to allay public concerns about overcharging.” Starting next month, the fare will be 50 yuan ($8 or £5) for the first 1.9 miles (3km). After that, riders pay seven yuan for each subsequent kilometer and a 50-yuan charge kicks in if the call is canceled.

    But now we might have a new problems. As one skeptical individual commented, “In [the] future, don’t rule out ambulances taking a detour when using the meter…”

    Our Bottom Line: The Market or Command?

    The news report said the individual who paid 3600 yuan had a life threatening digestive disorder. With a dying person unable and unwilling to negotiate price, we no longer have a downward sloping demand curve that displays the inverse connection between price and quantity. Instead we get a market with distorted prices.

    Adam Smith suggested that government provide police protection, national defense, enforce contracts and oversee a monetary system–whatever the market could not produce. But what to do when supply and demand are dysfunctional? We could accept a government that ran the ambulance service but then the new incentives would be equally or more troublesome.

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  • Weekly roundup and Single-payer healthcare plan

    Where Health Care Costs Less

    Apr 28 • Behavioral Economics, Businesses, Demand, Supply, and Markets, fiscal policy, Government, Health Care, Lifestyle, Regulation, Thinking Economically • 111 Views

    Because Medicare decides the price of health care procedures for people who are 65 and older, wouldn’t you expect that everywhere its per capita spending is pretty consistent?

    It’s not. Similarly, with private insurance, what we pay can depend on where we live.

    Where are we going? To the incentives that affect health care spending.

    High and Low Health Care Spenders

    Medicare and Private Payers

    Using a NY Times interactive that compared per capita Medicare and private payer health care spending, I filled in several locations. As you can see, New York City has high Medicare and high private insurer per person costs while Portland, Oregon is low for both.

    Health care spending

    From: NY Times



    High and Low Procedure Prices in Different States

    Below are maps that display how states vary. Simplifying somewhat, we can say that the lightest colors indicate the cheapest medical care while the darkest blue reflects the opposite:

    Doctors’ Visits

    Health care spending


    Uterus Exam

    Health care spending



    Health care spending


    High and Low Procedure Prices in One City

    Health care spending

    From: NY Times


    High and Low Procedure Prices In One State

    Health care spending for ultrasound procedures

    Our Bottom Line: Incentive

    Trying to figure out a rational pricing pattern, we can identify the incentives that make heath care more expensive. Market structure definitely makes a difference. Hospitals that have no competition on average charge 15% more–rather interesting because the same hospitals can enjoy the efficiencies of size. Similarly, with private insurance the market affects what we pay. However, because government sets the price for Medicare reimbursement, it’s the extra procedures that generate more revenue.

    All of this just means that in a hodgepodge of prices and procedures, the one common denominator is incentive.

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  • coffee supply chain

    What Do Coffee and Pencils Have in Common?

    Apr 27 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Developing Economies, Economic Thinkers, International Trade and Finance, Labor, Lifestyle, Thinking Economically • 147 Views

    In a 1958 essay, a pencil says to us, “Pick me up and look me over. What do you see? Not much meets the eye–there’s some wood, lacquer, the printed labeling, a graphite lead, a bit of metal, and an eraser…”

    Continuing, though, we learn a pencil is not as simple as it first appears. Made from trees in California and Oregon, it requires trucks, saws, rope, logging camps. Some millwork is next where the logs are cut into “pencil-length slats” and tinted. In a pencil factory, the slats receive graphite “lead” from Ceylon (now Sri Lanka) that was mixed with clay from Mississippi, some brass made of zinc and copper and rubber-like erasers from Malaysia.

    What are we really talking about? Global supply chain links.

    The Coffee Supply Chain

    Like a pencil, making a cup of coffee is not as simple as it might seem.

    The beginning…

    Let’s start with where the coffee grows. One likely possibility is a small farm in a warm wet place. For the best beans, we also need some elevation. (I’ve labeled Yirgachette because we later look at its coffee.)

    Coffee Supply Chain

    From: Businesscasestudies.com

    The end…

    And where does it end up? Looking for the world’s biggest coffee drinkers, we would go to Scandinavia. Finland, Sweden, Norway and Denmark are in the top six. The U.S. is #11.

    Top Coffee Drinkers: Annual Per Capita Consumption


    From: WSJ (Euromonitor for 2014)

    And this is what can happen in the middle…

    Let’s assume that our coffee was grown in the Sidamo region of Ethiopia in the village of Yirgacheffe and winds up in California. In Door to Door, journalist David Humes selected Yirgacheffe because legend places the first coffee plant there. On the farm, the coffee cherries have to be quickly processed and then dried to retain their flavor and quality. Then, from the village, the beans travel 250 miles to Addis Ababa for final processing and packing and then another 536 miles to the Republic of Djibouti where they board a ship that crosses the Suez Canal to the Mediterranean, the Straits of Gibraltar to the Atlantic, and then through the Panama Canal to a roaster and a retailer in California.

    As the beans move through their 11,000 mile journey, the transactions can multiply. The farmer could sell his beans to a local business that does the processing and then sells them to a broker. From the broker, the beans go to a local city and then a port. Meanwhile the beans have to be graded and their destination–specialty coffee makers or commercial buyers–determined. The chain would have many fewer links if the coffee retailer in the U.S. has a direct relationship wth a farmer.

    Our Bottom Line: the Price System

    Why do hundreds of people cooperate to grow, ship, store, process, and sell coffee?

    Nobel Laureate Milton Friedman (1912-2006) said, “the price system.” Prices are the incentives that encourage us to form the worldwide supply chains that compose globalization.

    And they are the reason that we have pencils and freshly roasted cups of coffee.

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