Lawrence Economics Blog

Why Local Water Rates Matter and What We Can Do About It

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Murtaza Edries, who graduated with a major in economics in 2010, recently gave a talk on locally generated political and economic change in Afganistan at a TEDx Kabul conference.  Since graduation, Edries has worked for several organizations in Afganistan that have been involved in reform projects.  In his talk, he addresses the importance of developing reforms that derive from local needs and local initiative.  He is a candidate for a Fulbright scholarship.  He is very excited about the potential reforms in Afganistan including those that might arise from the presidential election now in progress.

Remarkably, this is the 1000^th post on the Lawrence Economics Blog.  Wow.

Along the way, we have demonstrated that economists are in surprising agreement about a surprising number of things, though we tend to differ from Lawrence students.   We have had some actual economic analysis, such as explaining Giffen Goods to Matthew Yglesias, evaluating the argument that a great wine shortage is upon us, and reviewing Malcolm Gladwell’s Outliers.

We’ve also looked at topics such as consumption smoothing (for goods such as underwear) without and with a random stopping point (such as a robot uprising).

I’d probably be remiss if I didn’t mention something about innovation, such as our (okay, my) continuing fascination with Joseph Schumpeter, as well as these remarkable spitballing roots of an American icon.

He’s a doctor, he’s a college professor, but he’s also a sort of rough and tumble guy.

Spanning the globe, we have taken on the literal meaning of place names, challenged the conventional wisdom on why people (such as Jonathan) vote the way they do, and normalized the data for Olympic medal counts so that Hungary might fare a little better. 

Speaking of Hungary and the eastern block, Professor Galambos’ has posted some great stuff on Goulash Capitalism and his (should-be) annual Lenin’s birthday message. 

No doubt our most intriguing posts are our continuing series on moral (and other) hazards. Here’s a taste:

L.W. Burdeshaw, an insurance agent in Chipley, told the St. Petersburg Times in 1982 that his list of policyholders included the following: a man who sawed off his left hand at work, a man who shot off his foot while protecting chickens, a man who lost his hand while trying to shoot a hawk, a man who somehow lost two limbs in an accident involving a rifle and a tractor, and a man who bought a policy and then, less than 12 hours later, shot off his foot while aiming at a squirrel.

“There was another man who took out insurance with 28 or 38 companies,” said Murray Armstrong, an insurance official for Liberty National. “He was a farmer and ordinarily drove around the farm in his stick shift pickup. This day – the day of the accident – he drove his wife’s automatic transmission car and he lost his left foot. If he’d been driving his pickup, he’d have had to use that foot for the clutch. He also had a tourniquet in his pocket. We asked why he had it and he said, ‘Snakes. In case of snake bite.’ He’d taken out so much insurance he was paying premiums that cost more than his income. He wasn’t poor, either. Middle class. He collected more than $1-million from all the companies. It was hard to make a jury believe a man would shoot off his foot.”

Who knew people were so crazy, er, rational? Anyway, Incentives matter! 

If you’ve ever wondered what an “S-Curve” is in the context of the diffusion of innovations, check out the piece at  Quartz on “The Slow Death of the Microwave.”  The piece shows what are effectively household adoption rates of various consumer items over the past 100+ years.  It is called an “S” curve because the initial roll out tends to be somewhat prolonged (the bottom _ of the S) followed by a rather steep increase as the item catches on (the / part), and finally a leveling off when most of the population has adopted it.  The curves themselves contrast both rates of diffusion and total penetration rates.  The microwave, for example, went from 10 to 80% of households in a ten-year period.  Compare that with stoves, washers, dryers, and even telephones, which took their sweet time becoming the proverbial “household” items.

The figure* actually says a lot about the characteristics of American households.  At the onset of World War II, for instance, the majority of households did not have refrigerators, clothes washers, telephones, or color televisions.  The curves also show the dramatic impact of the Great Depression on the diffusion of telephones, electricity (both stunting then accelerating diffusion), and automobiles.  

As for the article, it’s a fascinating look at the microwave, though it seems a bit premature to be calling its “death,” given that the vast majority of households can still pop corn and defrost meat in short order. Bloomberg seems to agree with me on this point.

But when you read a little deeper, it turns out that people aren’t actually abandoning microwaves; they’re just not replacing them as frequently.

Yep.  Still some cool graphics, though.