Economics and the mid-life crisis have much in common: Both dwell on foregone opportunities

C'est la vie; c'est la guerre; c'est la pomme de terre . . . . . . . . . . . . . email: jpalmer at uwo dot ca

. . . . . . . . . . .Richard Posner should be awarded the next Nobel Prize in Economics . . . . . . . . . . . .

Saturday, November 26, 2005

Gasoline Pricing Puzzle

For the past two weeks, Mac' Milk, a variety store in our town (with hi-tech gas pumps) has been selling gasoline for about 7 cents/litre less than the other stations in town. The price at this station has been about 10 cents/litre below that of gas stations in other towns within a fifteen minute to half-hour drive from here.


They always had cars at their pumps. There were sometimes short line-ups (which grew longer when pay-at-the-pump wasn't working). There were also stories that one of the other gas station proprietors in town called the manageress of this station to encourage them to raise their price [which, most likely, would be illegal, especially if successful].

When I asked someone in town why they persisted in charging such a low price, they said,
The woman said the company told her to keep the price low. They want to increase the gallonage.
Does that make sense? Why would senior managers of a major variety store chain (Mac's Milk) want to increase its "gallonage" of gasoline at one particular outlet? And why didn't the other gasoline stations in town follow their low price? And why did people fill up at the other stations at all?

Whatever the reason, I kept the top half of the tank full while this odd pricing strategy was occuring.

Friday, November 25, 2005

100 Notable Books of the Year

Here is the list from the NYTimes (reg. req'd) that will be published next month. At that site, there are links to reviews. Here are some brief notes and questions:
  1. I have actually heard of one or two of these books.
  2. Is it incestuous for them to list so many books by NYTimes op-ed writers?
  3. How many of them do you think this man has read? My guess is about 35.
  4. Are there any Canadian writers on the list?

Thursday, November 24, 2005

The Benefits of Melatonin

Melatonin is hormone normally created by the body while you are asleep. I strongly recommend that you read the Wikipedia write-up about it.

Ms. Eclectic swears it helps with insomnia. So does JA who wrote to me:

I have been using it for years.

Melatonin level decline is a major issue with age, hence sleep problems for so many older folks.

1mg tablet is more than sufficient (that's many times 'natural ' output).
Problems include:

  1. You never know what you are buying; early product was from pineal gland of animals. Now we are told it's almost all synthetic. Assays of product out there would, like many nutraceuticals , reveal a wide range of substances and potencies I'm sure. I use Puritan Pride's 1mg tablet (must import but cheap)- find it works best for me, whatever it is.
  2. Slow onset of action - some physiologists claim it's not a 'hypnotic' (sleep inducer) at all but just sets your sleep 'clock'. I disagree from personal experience, even if that effect is placebo ;-).
  3. It's a complex hormone and we don't know nearly enough about its other actions to know if they are good (Cancer prevention??? as article suggested) or bad stuff.
    Nevertheless, I'm still alive - sort of - after more than a decade of use.
This seems like an efficient health supplement. JA's message to me was in response to this article that I sent to several friends who suffer from sleep disorders of varying degrees.
...the first clues that otherwise healthy people who do not get enough sleep or who shift their sleep schedules because of work, family or lifestyle may be endangering their health emerged from large epidemiological studies that found people who slept the least appeared to be significantly more likely to die.

"The strongest evidence out there right now is for the risk of overall mortality, but we also see the association for a number of specific causes," said Sanjay R. Patel of Harvard Medical School, who led one of the studies, involving more than 82,000 nurses, that found an increased risk of death among those who slept less than six hours a night.
As a result of these recommendations, I've started taking melatonin...... when I remember to take it........ along with scotch or red wine...... etc.

Wal-Mart and the Minimum Wage

There has been considerable discussion in the blogosphere of Wal-Mart's call for an increase in the minimum wage (e.g., see here and here). For a very cogent discussion of Wal-Mart's advocating an increase in the minimum wage, see this piece by T.J. Brooks:

Wal-Mart and the early 20th century progressives are not the only ones to try to use minimum wage laws to achieve their own ends. Unions and organized labor are also often at the forefront in support of raising the minimum wage.

Surely their motives are beyond recourse? The Neumark paper suggests that this is not the case. As it turns out, minimum wage laws raise the earnings of relatively low-wage union members at the expense of the earnings of the lowest-wage nonunion workers. Firms that face the higher labor costs are forced to fire some people, which tend to be the nonunion employees, allowing the union employees to step in and take on some of the extra work.

Now let me be very clear. I do not think our local progressives or our city council had the same nefarious motives the others have had. I really believe they want to help the working poor. But I also believe that a higher minimum wage will not achieve that goal. Economic theory, empirical evidence and nearly 100 years of history are on my side.

The purported rebuttal to T. J. Brook's piece was a boring and typical exercise in irrelevant, non-sequitured Bush-bashing coupled with a call for a higher social safety net without regard for the changes in incentives that would result.

Wednesday, November 23, 2005

Small Talk and the Economics of Signaling

Craig Newmark recently linked to this article [make sure you bookmark his blog, if you have not already done so!]. Even though it is more than a year old, the article has timeless advice, which I promptly sent to my offspring. As I said to them, when I follow this advice, things are good; when I don't, they aren't. Here, in this excerpt, is the pith of the piece:
The ability to connect in short, casual conversations can make or break careers, friendships and romances -- it's how we gather information and, hopefully, make a favorable impression. If you don't believe me, there are thousands of consultants, authors and communication coaches who will (for a fee) share their wisdom and tips for breaking the ice, working a room and taking over the world, one convention chitchat at a time.

Pay no attention to the experts behind the curtain. They'll have you practicing opening lines in your mirror, which will make you look stiff and silly in front of a real person. There are only three golden rules for small talk:

1. Shut up and listen.
2. When in doubt, repeat Rule 1.
3. People, even the really shy ones, like to talk about themselves and will do so if you know how to draw them out. You have to be genuinely interested. You have to check your ego. If this is done right, they walk away thinking you're great.
Small talk sends signals to and from people, but signals are just probablistic estimates about complex characteristics, about which it is costly to collect information. It is sometimes/often worth the effort to think about the signals one sends: the incremental expected benefits of doing so will usually outweigh the expected incremental costs of doing so.

Tuesday, November 22, 2005

Top Ten Over-Used Business Expressions

From Chicago Business On-Line [explanatory comments in the original]:
10. Bandwidth
9. Spinning our wheels
8. Let's not re-invent the wheel
7. Team-member
6. Pro-active
5. Work-life balance
4. Let's compare apples to apples, not apples to oranges.
3. Self-starter
2. Let's hit the ground running.
1. Value-added

I would add "systemic" and "go-getter" to the list.
For more on biz-jargon, see this (courtesy of Craig Newmark)

Monday, November 21, 2005

The Market for Strippers:
How Can There Be a Shortage?

The headline to a recent article in the Edmonton Sun screams "Stripper Shortage" [h/t to JBC].

Wait a minute. When I teach the economics of shortages [or excess quantity demanded over the quantity supplied (not excess demand!)], I tell my students that they must refer to a shortage at a specific price (usually the current price). There is never a shortage if market prices are allowed to adjust freely to shifts in the supply and demand curves.

This article never mentions the price, though it is clear that wage rates underlie much of the economics of the story.
Canada's welcome mat is still rolled out for foreign strippers and lap dancers who can get quick visas to fill a domestic "labour shortage."

Last December, the Liberal government announced it was cancelling a controversial program that allowed exotic dancers to gain temporary work permits based on a national labour market opinion.

But it was quietly replaced by a process that permits strip club owners to bring in foreign dancers just by filling out the proper paper work.
It appears that without immigration the wage rate for strippers would be considerably higher than it is with immigration. Easing the way for foreigners to obtain work permits for stripping means club owners can pay lower wages and earn higher nominal profits (which presumably are capitalized into the value of their firms).

There is, no doubt, some fraud and exploitation in this business. At the same time, I wonder whether some of the concern about fraud and exploitation is just disguised good old protectionism for Canadian strippers. In this respect, is there any reason to believe the economics of stripping in Canada differs much from the economics of mercantilistic protectionism? [see here and here].

Sunday, November 20, 2005

Stone-Skipping Efficiency

Finding flat stones and skipping them across the water is a great activity for kids of all ages. I have some really nice memories of skipping stones with my dad, with my children, with my nephew, and with my grandchildren.

What do you think is the most efficient angle for the stone to hit the water (if you're trying to make the stones skip a lot of times)?[Quotation below and link via CBC, courtesy of cmt]

Throwers should tilt stones about 20 degrees to the lake's surface, an angle first predicted by French researchers last year.

Shin-ichiro Nagahiro and Yoshinori Hayakawa of the Tohoku University Department of Physics in Sendai, Japan, created a mathematical formula to confirm the French experiment.

The Japanese researchers used a numerical method called smoothed particle hydrodynamics to simulate the skipping stone.

They also derived an equation describing the disk's motion.
Both methods provided a confirmation of the magic angle of about 20 degrees.
What do you think the record is for the most skips for one throw of a stone?

38, according Nature magazine, also quoted by the CBC. I guess they must have used a slo-mo replay to count them.

I wonder what the optimal weight of the stone is, and whether the optimal weight varies from fresh water to salt water.
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