There are rumors of a fledgling Lawrence Economics Team. I am probably the wrong person to ask. Coach?
As students in my 300 class will soon learn, one of the bedrocks of consumer choice theory is that we take tastes as given.
In a possibly related note, this house was just brought to my attention.
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.
Outsourcing is once again in the news, including this attention-grabbing headline: “Developer outsources job to China so he can watch cat videos.”
That’s a pretty self explanatory, though misleading, characterization, I’d say. It seems he’s outsourcing his job because he can reduce his own personal costs significantly without a detectable decrease in quality. That’s efficiency enhancing, no?
Further evidence to support my conjecture comes near the end of the article:
The kicker: Further digging found that Bob was taking jobs with other firms and outsourcing that work to China too. “It looked like he earned several hundred thousand dollars a year, and only had to pay the Chinese consulting firm about fifty grand annually,” said Verizon.
All this seems to suggest that there is no world equilibrium wage in the software industry right now.
What is it with Steven Landsburg and apples?
PART 1: Audrey shops at Wegman’s supermarket, where she spends $20 a week to buy 10 apples and 5 bananas. IF she bought the same 10 apples and 5 bananas at Top’s supermarket, she’d pay $30. True or False: Audrey is wise to continue shopping at Wegman’s. (Hint: This is easy).
PART 2: You earn $100. You can use your $100 to buy 100 current apples, 200 future apples, or any combination in between.
Consider a 50% tax on wages versus a 40% tax on all income (that is, wages and interest income) and assume both taxes raise the same amount of revenue.
Which tax do you prefer? Under which tax do you consume more (and save less) today? (Hint: I’m not sure if this is easy or not).
The Girl Scouts are in the news again, this time for ruthlessly exercising market power:
Girl Scout cookies sell for different prices in different areas. The going price is either $3.50 or $4.00 depending on where you live. Local Girl Scout councils are actually allowed to set any price they want…
Well, perhaps not ruthless. The author incorrectly titles it “price gouging,” when in fact it is simply a form of third-degree price discrimination, I suppose. I would be interested in seeing data on different prices across different markets. Do you think the different elasticities of demand stem from differences in income? Differences in tastes? Differences in close substitutes? Why isn’t there entry to wipe away the excess profits? I could spend the rest of the day thinking about this (and probably will).
For you 450 readers, perhaps there is an arbitrage opportunity out there for a would-be (Kirznerian) entrepreneur.
I am definitely going to check the price before I commit to Girl Scout cookies for the Economics TeaBA.
Speaking of the TeaBA, see you Monday at 4.