Economics Question #3

Last week’s question: Why do new cars costing $8,000 rent for $25 a day, while morning suits costing only $250 rent for around $45?

There are again multiple factors. The big rental groups buy new cars in high volumes and apparently they can sell them for 75% of the original price. Suit rental shops tend to be locally owned and so they cannot enjoy the same advantages for buying in bulk. There is no important resale market so they have to cover more or less all the cost of the suit. Another important advantage for the car rental companies is that their product is used every day of the week while suits tend to be taken out on Saturdays. Car rental companies can make significant profits with add-ons such as insurance or what they charge you if you don’t fill up the petrol tank. Finally a suit may have to be altered to fit the customer. Also each suit must be dry-cleaned before it can be rented out again. Obviously a car will have to be hosed down but this is much cheaper and represents a fraction of the cost of the car.

This week’s question is: Why do theatres discount prices on spare tickets just before a performance whereas airlines and rail companies raise prices for last minute customers?

 

Spontaneous Order and Society

       Spontaneous order is a term used to describe the unplanned emergence of order out of apparent chaos. It is an idea that is undoubtedly counterintuitive – if I sit on the sofa for a couple of hours and then go to the kitchen, I will not discover that all the dishes have miraculously been washed. Yet we can see it all around us – in human language, in the evolution of life on Earth and in the free market economy – to give just three examples.

Natural languages are not designed; they are the products mainly of evolutionary rather than some kind of conscious construction. The way language evolves is captured in this extract which I found on the internet:

Languages deal with and describe the natural world, a world which is so complex that any individual attempt to describe it, and make sense of it, can only capture part of it. In order to survive, each individual must make some sense of his environment, most fundamentally by acquiring a language. But the language of each individual (his idiolect) only functions effectively if it forms part of a wider structure such as the language of a group, a region or a nation. So our languages are complex decentralised mechanisms for transmitting information. And we use them confidently without much explicit understanding of their structure or of how they develop (Two Kinds of Order by Dr John Marks).

Let’s turn to evolution. Some creationists have argued that because of what they call “irreducible complexity” it is impossible to explain things such as the human eye or the clotting of blood without the existence of an intelligent designer. I think that science  has successfully refuted that idea. But what is interesting is that the same people who deny evolution have no problem accepting the complexity that has evolved in the modern economy. I can just go to Adolfo Dominguez and buy a shirt without having to have ordered it before.

The cooperation required to make that humble shirt was enormous, with inputs from all over the world, but nobody designed these structures (obviously someone did design the shirt). And we don’t need a Minister for Shirts to guarantee that I can find one.

Spontaneous Order can thus be applied to social theory. Self-interested individuals can unintentionally create an order that may well be superior to the order created through the issuing of commands. A free society maintains order not through diktat but through traditions and institutions that have evolved and have been passed down from previous generations. The moral framework for human society can never be set in stone, but is constantly adapting through a process of trial and error until we can incorporate new rules that allow society to function better. It is this balance between existing laws and customs and innovation that is so vital. Obviously in the real world things are messy. Scientific progress may be a constant – I don’t think we will go back to believing in alchemy although with some of the things I read in the papers, I wouldn’t bet against it. Moral progress though is another question altogether. But I feel the concept of spontaneous order is an invaluable tool in understanding how societies work.

Further  reading

Complexity and Intelligent Design How ‘Spontaneous Order’ Applies to Economics and Evolution

 

http://abcnews.go.com/Technology/WhosCounting/story?id=1077586

 

Spontaneous Order By Nigel Ashford

 

http://www.fee.org/publications/the-freeman/article.asp?aid=4571

 

Two Kinds of Order by Dr John Marks

 
http://www.ertnet.demon.co.uk/2kinds.html

 

I, Pencil My Family Tree as told to Leonard E. Read

http://www.econlib.org/library/Essays/rdPncl1.html

 

 

 

 

 

 

 

 

 

 

 

 

 

My Media Week 27/04/08

The Sunday Supplement is part of a programme called the Westminster Hour. They are 15-minute programmes on topics such as “The Jam Generation” and “Who owns Adam Smith?” These are not podcasts but you can listen to them at the website.

http://news.bbc.co.uk/1/hi/programmes/the_westminster_hour/6739227.stm

PETA Offers Incentive for Test-Tube Meat Research.Animal rights group PETA is offering a $1 million prize for the development of commercially-viable “test-tube meat” — real meat grown through a lab process, not from a live animal.

http://www.npr.org/templates/story/story.php?storyId=89942776

‘Elite’… What’s it to You? Fresh Air linguist Geoff Nunberg considers the evolution of the meaning of the “e” word.

http://www.npr.org/templates/story/story.php?storyId=89940718

This week’s Start the Week includes the philosophers Daniel Dennett and Raymond Tallis. Biographer Carole Seymour Jones discusses her new book A Dangerous Liaison, a revisionist take on Jean-Paul Sartre and Simone de Beauvoir. The podcast is only available for a week but you can listen to this and lots of previous shows at the website.

http://www.bbc.co.uk/radio4/factual/starttheweek.shtml

Small is not beautiful

A new report on the ‘way forward for agriculture’ has been used to justify dragging farming backwards – to the detriment of the poor.

http://www.spiked-online.com/index.php?/site/article/5016/

Morality and political violence

A Report from ABC Radio National (Australia) looking at the moral questions relating to war,terrorism and rebellion. This podcast has a transcript – they are usually posted a couple of day after the programme has been aired.

http://www.abc.net.au/rn/philosopherszone/stories/2008/2223849.htm

And finally something I saw in The Observer today – Revenge is a dish best served … online.

http://www.guardian.co.uk/technology/2008/apr/27/internet.blogging

 

 

 

My Favourite Links #3

Funtrivia

An excellent trivia website with 91,000 quizzes and a total of 1,700,000 questions. They have 1,900,000 members but you can play without being a member. The quizzes are organised into categories such as history, geography and science. Here are a few sample quizzes:

On First Name Terms with British Bands

http://www.funtrivia.com/trivia-quiz/Music/On-First-Name-Terms-with-British-Bands-249548.html

U.K. Shipping Forecast Areas Part I

http://www.funtrivia.com/playquiz/quiz2742841f66fa8.html

Grammatical and Lexical Items

http://www.funtrivia.com/playquiz/quiz20700017b3c48.html

Basics of Real Estate

http://www.funtrivia.com/playquiz/quiz2622771e07360.html

This is also an excellent way for students to practise their English. Here is the website.

www.funtrivia.com

We’ve never had it so bad

 

One of my favourite cartoons has two cavemen from the dim and distant past in conversation. The caption says:

”Something is just not right – our air is clean, our water is pure, we all get plenty of exercise, everything we eat is free-range and organic and yet nobody lives past 30.”

          We live in an age where it has become fashionable to attack progress. The litany is familiar: Modern life is poisoning us, we no longer live in a “natural” way and our kids are going to beat us to the grave. This atavistic world view can be seen in pseudoscience, alternative medicine and of course in some of the more extreme elements of the environmental movement. It’s because we have advanced so much that we can afford to take this progress for granted.

George Monbiot typifies this attitude. In the Guardian last year he came out with this:

“Governments love growth because it excuses them from dealing with inequality….. Growth is a political sedative, snuffing out protest, permitting governments to avoid confrontation with the rich, preventing the construction of a just and sustainable economy.”

No George, growth is good. Humans cannot stand still. Although if we put you in charge, I’m sure you could achieve zero growth. Thanks to this satanic growth people are living longer and longer. With his obsession with equality. Monbiot fails to notice something that can be illustrated with this example. Nathan Mayer Rothschild, the famous banker, was one of the richest men of the early 19th century. Yet he died in his fifties from an infected abscess, a disease that can now be cured with $5 of over-the-counter antibiotics.

This leads on to an interesting thought experiment. Would you like to be an ordinary person of today or the richest man in the world from 150 years ago?

      Think about it.

 

 

 

 

 

My Favourite Links #2

The Skeptic’s Dictionary

The Skeptic’s Dictionary is a collection of skeptical (Sorry, Douglas) essays by Robert Todd Carroll, an atheist and uncompromising skeptic from the USA. The site was launched in 1994 and contains more than 400 entries. It covers such categories as alternative medicine, cryptozoology, extraterrestrials and UFOs, frauds and hoaxes, junk science, New Age and the paranormal. For me this is an invaluable resource, which helps to explain the appeal and popularity of these irrational beliefs that have survived despite the enormous advances that science has propitiated and the power of the scienific method to explain the world.

www.skepdic.com

Economics Question#2

Last week’s question: Why do female models earn so much more than male models?

I suppose that was a bit easy but here’s the answer anyway. The main point is that models are used to sell clothes and that women spend more than twice as much as men in this area. Magazines such as Vogue and Elle exert an enormous influence. They feature hundreds of female models - so one who stands out is worth a fortune.  And there are whole areas such as cosmetics where the market is almost exclusively for women.

 

This week’s question is:

Why do new cars costing $8,000 rent for $25 a day , while morning suits costing only $250 rent for around $45?

 

My Media Week 20/04/08

This week is the fortieth anniversary of Enoch Powell’s infamous Rivers of Blood speech and the Guardian has an interesting article by Paul Gilroy. I actually spoke to Powell at the House of Commons on a couple of occasions and he was a fascinating figure – a politician, linguist, writer, academic, soldier and poet. And that was just in the morning!  What many people forget is that Powell was a monetarist before it was fashionable. Of course one thing is to find him intriguing and another thing is to agree with any of his views. I would like to meet Tony Benn but I wouldn’t want him in charge of the economy.

http://www.guardian.co.uk/commentisfree/2008/apr/18/britishidentity.race

 I see some parallels with another political maverick – Barry Goldwater. In his autobiography Chronicles, Vol 1, Bob Dylan states “My favorite politician was Arizona Senator Barry Goldwater.” Goldwater was the Republican Party’s nominee for president in the 1964 election, where he suffered a catastrophic defeat to Lyndon Johnson. He voted aganst the Civil Rights Act of 1964, remarking, “You can’t legislate morality.” He disliked Title 2 (This outlawed discrimination in hotels, motels, restaurants, theaters etc), which he viewed as a violation of individual liberty. He helped for kick-start the renaissance of American Conservativism in the 1960s. This culminated in the 80s with the election of Ronald Reagan. But Goldwater was his own man – he viewed abortion as a matter of personal choice, not an area where the  government should get involved. As a staunch defender of personal liberty, he saw the religious right as a threat to personal privacy and individual liberties. His most famous quote sums up his philosophy: “I would remind you that extremism in the defense of liberty is no vice! And let me remind you also that moderation in the pursuit of justice is no virtue.”

Here is a listening from NPR about him. The Goldwater part starts after about 12m 20s.

http://www.npr.org/templates/story/story.php?storyId=89689792

Immigrants: the more the merrier. An article in defence of immigration.

http://www.spiked-online.com/index.php?/site/article/4992/

In these two Cato Institute Daily Podcasts, economist Don Boudreaux discusses globalization with Cato’s Caleb Brown.  The first is here; the second is here.  Both are quite brief.

The Eligible-Bachelor Paradox. An article about how economics and game theory explain the shortage of available, appealing men.

http://www.slate.com/id/2188684/

Um … A Pause for Linguistic Appreciation. Fresh Air linguist Geoff Nunberg talks about that little word, “um.” (5 mins approx.)

http://www.npr.org/templates/story/story.php?storyId=89620768

An interview with David Lodge about his new novel Deaf Sentence.

http://books.guardian.co.uk/departments/generalfiction/story/0,,2275022,00.html

 

Why do female models earn……..

I have just received an order from Amazon. As usual all the the books are non-fiction -I don’t do literature. One of these books is The Economic Naturalist by Robert Frank of Cornell University. It contains practical questions about economics applied to everyday life that his students have answered over the years. So, I thought I would share some with you over the next few weeks.

 

The first question is:

 

Why do female models earn so much more than male models?

 

            You are welcome to post any suggestions and I will have the answer up next week.

 

My Media Week 13/04/2008

Here are some interesting things I have listened to or read this week.

“With Accelerate, R.E.M. Hits Top Speed Again.” An interview with the group REM talking about their latest album on NPR’s Fresh Air. It lasts about 40 minutes.

http://www.npr.org/templates/story/story.php?storyId=89491734

A thought-provoking critique, from a liberal perspective, on America’s attempt to export democracy, contrasting the successes in Japan and Germany with failures such as Cuba and Iraq.

http://www.econtalk.org/archives/2008/04/coyne_on_export.html

BBC Radio 4 has some excellent podcasts. The only problem is that they only keep them for seven days.

http://www.bbc.co.uk/radio/podcasts/directory/station/radio4/

Here is an article about the current national obsession with Shannon Mathews.

http://www.timesonline.co.uk/tol/comment/columnists/mick_hume/article3724114.ece

 Finally I couldn’t resist including this Guardian article from last year about one of those academic spats involving two professors.

http://books.guardian.co.uk/departments/politicsphilosophyandsociety/story/0,,2230971,00.html