Tag: Food for thought

Gladwell Claims There is No Free Lunch

In his latest Revisionist History podcast, Malcolm Gladwell gives us some food for thought about where we put our resources.  He claims that small liberal arts that develop gourmet-level dining services are doing so at the expense of bringing in  low-income students.  To develop his argument, he compares two elite schools from the northeast, characterizing the situation thusly:

They compete for the same students. Both have long traditions of academic excellence. But one of those schools is trying hard to close the gap between rich and poor in American society—and paying a high price for its effort. The other is making that problem worse—and reaping rewards as a result.

His logic is pretty straight forward: Schools have a budget constraint, and at the margin they can spend an additional dollar on financial aid or on campus amenities.  A school that invests in campus amenities will draw more students willing to pay a premium price, whereas a school that skimps (relatively speaking) on amenities in favor of financial aid will be at a relative disadvantage in two ways:  First, students generally prefer high-quality amenities to low-quality amenities. Second, it generates less revenue per student and therefore fewer resources to put into financial aid or campus amenities.

Malcolm Gladwell is an influential writer with best sellers to his credit such as Outliers and The Tipping Point, as well as about a million New Yorker articles, so this pieces is certain to make waves.  That he calls the investment in high-end dining services “a moral problem” and implores students not to go to schools with ridiculously good food pretty much ensures people will be up in arms about this.

This is also relevant from our perch here at a small liberal arts school with our own financial decisions to make.  I was more amused than convinced by the thesis when I first read the abstract, but after looking at the numbers and listening to Gladwell, I am more sympathetic (scroll down the Revisionist History page for the photo of a banana chocolate chip waffles with the school logo emblazoned in the center).   Though, I guess that’s why Gladwell is such a popular figure:  he makes an interesting claim, tells a good story, and makes a good case.

As an aside,  I think I speak for most people who attended a residential campus prior to 2000 when I say that the food even at campuses that “skimp” on quality is ridiculously good compared to what we ate (though I did love the Monte Cristo sandwich on Thursdays).

You can read more about it at the always lively Inside Higher Ed website.

Addendum:   It’s probably worth adding that it’s still okay to complain about food at your school.   You probably pay a lot of money for dining services, and with that, you expect certain levels of quality, variety, and availability.

A quick peek reveals that the average U.S. household (a.k.a., consumer unit) spends about $6,800 annually on food compared with college meal plans that run $2000-$3500 per semester.

Some Trivial Matters

Congratulations to Addison Goldberg and Steve Wasilczuk for their stints as trivia Grand Master and trivia Grand Master’s sidekick, respectively, for this year’s edition of the Lawrence trivia weekend.  These two were in my Freshman Studies class once upon a time, and I still have some documentation from that class to share with them upon graduation.

But for now, I would simply like to share some tips on cooking bacon from the folks at www.thekitchn.com.  First up, here they advise us to just add a little water to the pan. The water separates the fat from the bacon (that is, it renders it) and keeps the fat from splattering.  Here’s all you need to know:

Once the bacon is in the pan, add just enough water to completely coat the bottom of the pan and cook over medium-high heat until the water has evaporated. Reduce the heat to medium and cook the bacon until crisp.

For higher-volumes of bacon, however, I recommend that you forego the stove top altogether and put the bacon into the oven.   It doesn’t get any easier than this: cover a cookie sheet with tin foil, put the strips on top, pop it in the oven at 400F, and 15 minutes later the deed is done.

Once again, congratulations to this year’s trivia masters, and we’ll see you back here next year for the 50th.

And here’s the Lawrence Minute!


I’m Lovin’ It. But if that Counter Guy Gets $15/hour, I’m Lovin’ Less of It

I see that McDonalds employees from around the country have been walking off the job to protest low wages, even causing some restaurants to shut down temporarily.  What would happen, do you suppose, if McDonalds started paying its employees more?

Writing in ForbesTim Worstall makes the extraordinary claim that McDonalds could raise workers wages to $15 an hour and it would have no impact on the price of a Big Mac!  This is such an extraordinary claim that I will go ahead and quote it at length:

Hmm. Well, what else can we surmise about a rapacious capitalist organisation? In that ruthless pursuit of gelt and pilf for its shareholders it is going to gouge the customers for the absolute maximum that it can, yes? … What limits McDonald’s ability to entirely empty our wallets every time we want a hamburger is that there are other people who will also sell us one. Wendy’s, Jack in the Box, In and Out, there’s a multiplicity of places where we can go to fur our arteries. Which leads to our conclusion on pricing in a capitalist and free market economy. The capitalists charge the absolute maximum they can get away with, that ability being limited by the competition that comes from alternative suppliers.

Thus the price is not determined by the cost of production of an item. Which means that, if we raise McDonald’s production costs by increasing the wages of the workers, the price isn’t going to change. For it’s not production costs that determine prices: it’s competition that does. Another way to put this is that McDonald’s is already charging us the absolute maximum that it can for its current level of sales. Thus it cannot raise its prices if its production costs go up.

All of which means that the real change in the cost of a Big Mac, or the dollar menu, if McDonald’s workers were paid $15 an hour is: nothing. For production costs simply do not determine the prices that can be achieved in a competitive market.

I’m not sure I’ve ever heard anyone argue that costs don’t matter in determining prices:  Every text that I’ve taught out of walks through the logic of a firm’s profit maximizing decision — firms maximize profits by setting output where marginal revenue equals marginal cost.  So, costs do help to determine prices, at least the way I teach it. Continue reading I’m Lovin’ It. But if that Counter Guy Gets $15/hour, I’m Lovin’ Less of It

Summertime Rolls: Flipping Out, Going Bananas, and Finally Tying the Knot

It’s been a while since we updated the blog here, so let’s kick off the summer by getting back to the basics.

First, the Food Lab grills us on our grilling knowledge.  Do you think you should only flip your steak once?  Perhaps you are cooking your steaks wrong.   Wouldn’t surprise me.

Next up, Radius Foundation director Terry Moore gets up at a TED conference and tells us we are tying our shoes wrong. Who knew?

Finally, an oldie but goodie, Steven Landsburg wonders whether we are peeling our bananas from the wrong end.  Bananas have been a ripe topic in both my Econ 300 course and Econ 100 courses.  On the one hand, they are both delicious and nutritious.  On the other hand, one of our “Economic Naturalists” wonders why they are such a scarce resource on Warch first.

Who says a liberal education isn’t transformative?


Goulash capitalism?

The Hungarian version of Soviet-style economy was often referred to as “goulash communism“—it was a more permissive, generally more prosperous variant than what existed in several other Warsaw Pact countries. If the unique capitalism that Hungary is creating is to be “goulash capitalism,” it’s going to be a low-fat version. This will give yet another reason for some older folks wistfully to declare that “at least in the good old days, goulash used to be goulash.”

Brings to mind some of the happiest moments of my childhood… thanks, NYT!

(This seems like a good time to point out that goulash is a soup, and a very good one. It has beef, potatoes, paprika, sometimes beans, and other things. It is not some kind of a stew, or, worse yet, ground meat with some sauce.)

Hungary rarely gets on the front page of the New York Times, but the new Hungarian tax on fatty, sugary foods was such a bold step towards a healthier Hungary that even American journalists took notice. While the justification for the tax is the national need for a leaner populace, the real reason is probably the government’s need for a fatter treasury. Those of you taking Comparative Economic Systems are probably crying “soft paternalism!” right now. Or “hard paternalism.” As to the financial consequences: if the tax really cuts down on the consumption of unhealthy foodstuffs, not only will there be little revenue generated form the tax, but the very low Hungarian life expectancy will rise, costing the state more in health care expenditures.  Continue reading Goulash capitalism?

The Great Wines of New Jersey

Here’s a nice little piece on VoxEU from Orley Ashenfelter and his colleagues about how wine experts have trouble vertically differentiating wine quality.  And when I say “have trouble” what I really mean is “they simply can’t do it.”

This column argues that alleged experts repeatedly cannot tell a superstar wine from a cheaper bottle.

We’ve sort of suspected this since the so-called Judgment of Paris back in 1976, but a more recent Judgment at Princeton adds some real perspective by pitting the wines of France against those of, um, New Jersey:

The important conclusion of the ranking, as analysed by Richard Quandt from Princeton, is that Clos des Mouches is statistically significantly better than the nine other whites, which are all judged of equal quality, while one New Jersey red wine is statistically worse than all other nine reds.  None of the remaining wines, whether French or from New Jersey, is statistically different from the other. This implies that Château Mouton-Rothschild and Château Haut-Brion, two French superstars, cannot be distinguished from New Jersey reds, which cost only 5% of their French counterparts.

 The bold is mine, indicating a bold conclusion, indeed.

As is sometimes the case, the most amusing part of the article is buried in the footnotes:

Ginsburgh, the only writer of this paper who contributed nothing to the Judgment of Princeton, wants nevertheless to point out that he did not even know that New Jersey produces wine.


American Capitalism as A Delicious Milkshake

One of the greatest films you are ever likely to see about the intensity, competition and dynamism in American capitalism, There Will be Blood, is the midnight movie tonight in the Warch Campus Cinema.  As I watched the movie, I marveled at how all of those people and resources made their way into the middle of backwater nowhere within days of identifying a promising play. If you are a night owl type, I recommend you stroll over and see it.

As for the famous “milkshake” reference, that has to do with the “fugitive” nature of petroleum.  Indeed, as I tell my students, oil is more like buffalo, and gold is more like cows.  Gary Libecap has written extensively on oil field unitization as a solution to the “milkshake” problem.  Indeed, yours truly knows a thing or two about how this all played out.

“Spain is Doomed, Greece is Toast”

Here’s some more on the situation in Greece.  When I see a blog post titled “The Scariest Chart in Europe Just Got Even Scarier,” I typically think the author is invoking some grand hyperbole.

Perhaps not in this case.

Here’s Derek Thompson at The Atlantic:


Thompson points us to a link that draws this conclusion:  “Spain is doomed and Greece is toast.”  Of course, last year we pointed to Michael Lewis’s similarly dire predictions for Greece, where he observes “the closer you look, the worse it gets.”  He concluded Greece is simply incapable of reform in its current form.

That unemployment bar looks like a big fuse.

Econ Dept Picnic, Wednesday at 4:30

Take the SuperChill Challenge

The Department Picnic is an annual ritual at Lawrence, but one where we in the Economics Department haven’t quite mastered.  This is partly because many of the faculty are relatively new, and partly because we just aren’t that into rituals.

That said, we will be communing as a Department this Wednesday, May 30, from 4:30 to 6:00 on and around the Hiett first floor patio (Location subject to change).

If you plan to attend, please indicate your intention here.

Your affirmation on the Doodle poll will allow us to procure appropriate levels of pizza and SuperChill® (the empirically validated cola choice of the Economics Department), and will also help us to ration in the event that supplies run short.

We  look forward to seeing you there.

Abundance, not Stagnation, Characterizes the Future

If you believe that Tyler Cowen has appropriately declared the end of serious economic growth in the so-called “developed world,” check out the work of Peter Diamandis.  If you fervently disagree with Cowen’s view, also check out Diamondis.  In Abundance, the Future is Better than You Think, Diamondis (with co-author Steven Kotler) calls upon human ingenuity and innovation as the drivers of future abundance.  No Peak Oil here.  He reminds me of Julian Simon (the Ultimate Resource ) who challenged Paul Ehrlich (The Population Bomb) in a famous 1980 bet on the price of various metals and natural resources.  Spare the 16 minutes it takes to watch Diamandis give a Ted talk.

Econ 100 Preview, Complements

Click for Clucky!

Suppose the NFL players and owners fail to agree to terms on a new contract, thus reducing (or eliminating) the number of professional football games this coming season.  What are the expected changes (if any) to the equilibrium price and quantity of chicken wings?

Answer here.

Certainly, you will be more likely to get the correct answer if you rely on the basic theoretical model, rather than just winging it.

Jimmy John Responds to Incentives

The founder and big pickle behind the Jimmy John’s enterprise is threatening to take his fixins and go elsewhere, this according to the Champaign News-Gazette. Mr. Jimmy John (Jimmy John Liautaud) is upset about the steep tax hikes enacted this past week by the Illinois state legislature — raising the personal income tax from 3 to 5 percent (67% increase) and corporate taxes from 7.3 to 9.5 percent (30% increase).

“My family and I are out of here.”

This story has some personal interest to me, as I was in Champaign when he opened up one of his first shops back in the late 1980s.  I still recall one of my (more obnoxious) friends — impressed by the deliciousness of the Jimmy John’s sandwich — on the phone trying to bribe providing cash incentives for the workers to bring him an order outside of their regular delivery area.  Not too many years later, Jimmy John’s has gone from a couple of sandwich shops in east central Illinois to a big corporate supporter of everything from NASCAR to University of Illinois athletics.

Friend, that’s a lot of sandwiches.

If he indeed packs up corporate shop and heads elsewhere, it will certainly impact the local economy in some fashion.

Here’s his take:

Some people may not realize how many travel to Champaign-Urbana as a result of Jimmy John’s being here – many of them for training.

(Jimmy John) said his business accounts for “350 motel nights a week in Champaign, 1,400 motel nights a month.”

“They eat at Cheddars,” get automotive service at Sullivan-Parkhill and “drink at Carlos (Nieto’s) bars.”

Jimmy John’s offices occupy 23,000 square feet on Fox Drive, and Liautaud said he had considered buying a 20,000-square-foot building just north of those offices. Those plans went out the window with the tax increase, he said.

As far as the national economy goes, it probably doesn’t matter where Jimmy John sets up shop, if Champaign doesn’t enjoy the benefits, someone else will.  But, I wonder what sort of elasticity the legislative analysis used to estimate business leaving the state when they put these tax increases together?

Our Annual Scrooge Endorsement

From last year: an oldie, but goodie.:

Before The Accidental Theorist, before Freakonomics, there was The Armchair Economist, and that’s Steven Landsburg.

In this Slate piece, Landsburg makes the case that Scrooge wasn’t such a bad guy, and that savings, in fact, might just be more virtuous than spending. To wit:

In this whole world, there is nobody more generous than the miser–the man who could deplete the world’s resources but chooses not to. The only difference between miserliness and philanthropy is that the philanthropist serves a favored few while the miser spreads his largess far and wide.

If you build a house and refuse to buy a house, the rest of the world is one house richer. If you earn a dollar and refuse to spend a dollar, the rest of the world is one dollar richer–because you produced a dollar’s worth of goods and didn’t consume them.

You will know you’ve arrived as an economist when you can annoy your brethren by expounding on the virtues of Scrooge over the holiday season. For more pithy advice from Landsburg, we’ll be using his text in Economics 300 next fall.

See you there.

You might also want to check out the links at the O&M blog, including the fabulous Santa on leadership.

Mazel tov!

If you don’t find abstract mathematics palatable, try this one. Thanks to George Hart, Chief of Content at The Museum of Mathematics, we finally have proof: it is possible to slice your bagel into two and produce two linked, unbroken halves of this delicacy of Jewish origin (its name comes from Yiddish “beygel”).  The proof is constructive.

From George Hart

The layperson might take a quick look and say “Hey, that’s a Möbius strip shaped bagel!” Of course, it obviously isn’t, as it has a cream cheese side and a non-cream cheese side. But Mr. Hart does pose the Möbius bagel problem as a possible extension. My guess is that poor young George’s mathematical growth was seriously impeded by remarks such as “How many times have I told you not to play with your food?!” I definitely see an entrepreneurial opportunity here: just imagine how many math conferences would pay big bucks for catering that features Möbius bagels, dodecahedron-noodle soup, a spaghetti-knot challenge, and many Klein bottles of wine. I am soooo tagging this entry “Food for thought…”

[HT to Jeff Ely at Cheap Talk]

Nathan Myrhvold is Really Cooking

"The cake can rise about that much, max"

Some of you may recall my earlier post on Nathan Myrhvold, one of the great renaissance men geniuses of our age.  I follow that here with a tip to check out his TED talk on what he’s been up to of late.  His topics range from animal photography of spawning whales to digging up dinosaurs to cooking up some world-class barbecue.  (As an aside, the first few minutes on penguins is scatologically hilarious).

Mr. Myrhvold is back in the news for his new $500 cookbook that looks absolutely fantastic. As one of my friends puts it, “It’s exactly the kind of cookbook you’d expect the CTO of Microsoft to write.” The cookbook stems from a long-running interest in cooking, including taking a leave of absence from Microsoft to go to chef school if France. In his TED talk, he shows a picture of the cooker he’s engineered that he claims is more complicated than the nuclear reactor he designed.

If the cookbook is $500, I wonder what the oven goes for?  And, is there anyone other than Myrhvold that can repair it?

Friday Food for Thought: “I’m an Economist”

The Kruk Stops Here

John Kruk famously said, “I ain’t an athlete, lady, I’m a baseball player.”

For those of you who don’t know the (possibly apocryphal) tale, John Kruk was a rather fat man with a mullet, who could hit a baseball better than most people in the world.  Kruk’s view was that it wasn’t any “athletic” gifts, per se, that allowed him to hit so well, but rather his crazy hand-eye coordination and phenomenal reflexes.

After a game, a woman spotted him smoking a cigarette and she started to give him the business about how an athlete shouldn’t smoke, his body is a temple, to think about the kids, and on and on.

His infamous response is the title of his autobiography.

So, what does this have to do with Friday Food for Though?. Well, when people find out that I’m an economist, they will typically say things like, “Oh, this must be a really interesting time for you.”

Why is that?

“Oh, you know, because of all the things going on in the stock market and the economy and stuff like that.”

Lady, I don’t know about that sort of thing — I’m an economist.

Or perhaps that’s what we economists are supposed to do — study the economy. Well, I guess that’s one answer, but I don’t think it’s my answer.  I mean, I know something about what’s going on with the fiscal stimulus and the multiplier effect, but as Robert Barro points out, that it certainly not what I do.

Continue reading Friday Food for Thought: “I’m an Economist”

Should Ideas Be Left to the Free Market?

The good folks at Organizations & Markets ask why economists haven’t paid closer attention to the economics of free speech. The classic piece on this is Ronald Coase’s “The Market for Goods and the Market for Ideas” (available from campus IP addresses).   Coase asks why the rationale for goods’ market regulation doesn’t carry over into the realm of the market for ideas. Here is how he characterizes the prevailing attitudes:

In the market for goods, the government is commonly regarded as competent to regulate and properly motivated. Consumers lack the ability to make the appropriate choices. Producers often exercise monopolistic power and, in any case, without some form of government intervention, would not act in a way which promotes the public interest.

Fair enough. But then,

In the market for ideas, the position is very different. The government, if it attempted to regulate, would be inefficient and its motives would, in general, be bad, so that, even if it were successful in achieving what it wanted to accomplish, the results would be  undesirable. Consumers, on the other hand, if left free, exercise a fine discrimination in choosing between the alternative views placed before them, while producers, whether economically powerful or weak, who are found to be so unscrupulous in their behavior in other markets, can be trusted to act in the public interest, whether they publish or work for the New York Times, the Chicago Tribune or the Columbia Broadcasting System.

Coase wrote the piece in the early 1970s, partly in response to federal regulation of commercial advertising, wondering whether there is a difference between firms schlepping products via commercial advertisements in the goods market is really any different than an article or an editorial in the New York Times.

Improbably, Time Magazine carried an article on Coase’s article and summarized his position nicely:

Coase challenged two assumptions that, he says, have created the distinction in public policy: 1) that consumers are able to distinguish good ideas from bad on their own, though they need help in choosing among competing goods; and 2) that publishers and broadcasters deserve laissez-faire treatment while other entrepreneurs do not.

It might be tempting for us to dismiss Coase’s argument as glib posturing, or as an example of economists being too clever for our own good. But how we define and constrain free speech is a central element of our political system.  President Obama, in fact, spent his weekly radio address admonishing the recent Supreme Court decision that removed many legislative controls of corporate campaign financing.  One would suspect that Coase was arguing to relax regulation of the goods market, not extend regulation to the ideas market, but the proliferation of the internet and other news sources has perhaps muddied the waters so much that the distinction is unrecognizable.

So, more to come, I suspect.

Late Summer Chocolate Fix

Craig Pirrong, the Streetwise Professor, believes cocoa prices are fixed.   Why does he believe this?  The data, of course.

Here’s the scoop:

The basic result is that the July, 2010 price rose about 6 percent more than one would have predicted, given the movements in the September, November, and July ICE prices…  This rise in the relative price of July cocoa is exactly what you would expect to observe during a corner, and given the typical co-movements of all these prices, are highly unlikely to have occurred by chance in a competitive market.

If you read his post, which I recommend you do, you can see he developed a fairly straightforward methodology for inferring some sort of market manipulation in an earlier paper on soybeans.

Of course, I learned about price fixing from the frozen orange juice pits in Trading Places.