Tuesday, June 06, 2006

This Blog has Moved!

This blog started as an experiment. As with all experiments I chose the easy route: in this case, hosting by Google's blogger. After four months and 190 posts, this blog appears here to stay. So I am moving it to bigger digs.

In the future, please visit the new Core Economics Blog at economics.com.au (a nice easy name to remember). All of the past posts and comments are there too. You can also update your feeds on that site.

Thanks and I'll see you across the net ...

Sunday, June 04, 2006

Exploiting the unused resource

Yet another new way of renting movies has appeared in the US -- MovieBeam. (Here is the NYT write-up). But there is something much more profound that lies at the heart of that development. Something that gave me a radical idea about how to dramatically improve competition in our television markets. But first I need to explain just what MovieBeam does.

From the user's perspective, you spend US$200 for a set-top box and then pay per view for movies you watch after that ($4 for new releases, $2 for old stuff, $1 extra for high definition). You can watch them for 24 hours as much as you want; including pausing and rewinding. So it is exactly the same as renting a video without the trip to the video store or the late fees (if you are that way inclined).

The bit that interested me was how it all worked. It turns out that the movies are downloaded to the set-top boxes hard-drive (and it has plenty of capacity for 100 movies). But they get there via broadcast. MovieBeam pay PBS (US public television) to piggy back on an unused part of their spectrum. At these rates you couldn't watch this stuff in real time but if it is being downloaded, who cares? So the distribution method exploits a resource with a zero opportunity cost. A true win-win.

What this shows, however, is how truely outrageous our current broadcast television system is. It is all based on licenses for 'real time' viewing. That hogs spectrum but also forces viewers to watch in real time or try and record shows themselves. That is simply an inefficient use of spectrum. It restricts total spectrum use as a function of actual viewership and so makes spectrum a scarce resource; the source of broadcaster's market power over viewers and advertisers. In this respect, it works the same way as other broadcasting regulations (see my earlier post on multi-channelling and my post on the regulation of content).

Now to the radical idea: what would happen if the government gave everyone a MovieBeam type set-top box? Suppose the box was such that viewers could specify what they want to watch and that stuff is what they pick up in the broadcast. I suggest this will dramatically open up competition on broadcast television but allowing more access by 'channels' and 'programs' outside of traditional network broadcasters.

What about objections to this idea?
  • "Where will the spectrum come from?" The possibilities are endless. There is unused spectrum all over the place. More critically, there is unused spectrum held by the traditional broadcasters. We could make it a term of their licensing agreement that that spectrum by opened up for piggy back use.
  • "What about advertising?" There is no reason why the set-top recorder couldn't record programs with advertising. Indeed, it could probably be configured to stop advertisements being skipped.
  • "Does the government really need to fund this?" Not necessarily, but that was the radical bit to get your attention. But when it comes down to it, it would be just like funding roads or rail, this is just the transportation infrastructure for broadcast television. Paying for all of it is probably a tad extreme.
  • "Won't the traditional broadcasters go bankrupt with all this competition?" Ha ha ha, I can't believe you are even asking that. What do you think? They will still be there. This only creates a new option.
In summary, there are huge opportunities here to expand our range of useful spectrum for broadcast services. The technology at the household end has made this possible but also made it possible in a way that actually suits people -- to allow time shifting. In short, the jig is up.

Game Theorist: Hard choices

FYI: a short post today at Game Theorist: Hard choices.

Saturday, June 03, 2006

Planned congestion

[Link from Greeneconomics] Ed Glaeser advocates a form of congestion pricing for New York City traffic. This is similar to plans advocated by Stephen King and myself except that we don't see any reason why it can't be on all roads. (See my earlier post here and my Age op ed). Glaeser's piece makes a nice point about how the London system was actually progressive (favouring lower income commuters). He writes:
Some critics of congestion charges argue that they are unfair to low income people, but in London, lower-income bus travelers were the charge's biggest beneficiaries. Bus riders didn't have to pay the charge and their travel times plummeted. As the time cost of bus travel fell, the number of bus passengers during morning hours increased by 38% (some of this is due to improved bus service provision). Like London, New York has many more people who commute by public transportation than by car, and New York's many bus travelers would particularly benefit from a congestion charge reducing their commute times.

Thursday, June 01, 2006

Twisted blog

This comes from my brother, Jeremy. It is worthwhile following his guide in reading this blog post.
Another remarkable web document with a twist, but this one isn't as amusing as the 'cab driver' expert.

It's a blog about the recovery of a car accident victim in a coma. The blog is, as usual, in reverse chronological order, so the shock ending is at the top. You could just go straight to the key post (May 29th 2006) or you could scroll straight to the bottom and read upwards. (It's a bit long, but key posts are Friday 4/28 to Monday 5/1; Monday 5/8; Wednesday 5/17; Monday 5/22and Thursday 5/25 to the top.)

Click here to read the blog.

Funky data presentations

Google have generated a funky tool for viewing graphs of correlations of world development indicators. It has several dimensions including correlation, scale and also animinations across time. You can even pick your scale -- linear or logs. Someone will find this useful for classroom presentations.

Game Theorist: The Hard Line on Sleep

For those interested, I have a new post today at gametheorist on babies and getting them to sleep through the night. It is mostly reflections on personal experience.

Google Notebook

Google have come out with some wonderful little programs of late. Let me plug just one: Google Notebook. This one requires a little download to your browser (Firefox on Mac or PC or IE) and then you have a notebook hosted by Google that you can put links, thoughts and 'soon to be blogged' items. Just with the click of the right button. It also has a little notebook icon on your browser that you can open and add new notes. It is a great way of transferring thoughts from home to work to the laptop and back.

Wednesday, May 31, 2006

Insults: where are the new ideas?

So the Opposition Health spokesperson, Julia Gillard, got thrown out of Parliament today for calling the Health Minister, Tony Abbott, a "snivelling grub." Yesterday, Mr Abbott was not thrown out for saying the exact same insult. Commentators have called it a double standard.

Well sure, it is a double standard. But let me go out on a limb here and suggest that maybe it isn't a bad thing if the speaker throws out politicians for recycled insults. Yes, I know that Gillard was just being ironic. And that plays well in a sitcom. But what I really want to see is more innovation by our politicians in insults. It is critical for the entertainment function that is central to our democracy. In fact, that was what the Labor Party of old was really known for. Take Paul Keating for example:
  • "He has more hide than a team of elephants." (Keating on Howard)
  • "You boxhead you wouldn't know. You are flat out counting past ten." (Keating on Tuckey)
  • "(His performance) is like being flogged with a warm lettuce." (Keating on Hewson)
  • "The Opposition crowd could not raffle a chook in a pub" (Keating on everyone)
  • On each other ..
Whitlam: "That was a good speech. You should go back comrade, and get yourself an honours degree."
Keating: "What for ? Then I'd be like you."

But if all else fails we can just remember the late great Douglas Adams ...

"It gives me a headache just to try to think down to your level." (Marvin the Paranoid Android)

Let's face it, the Labor Party isn't going to get re-elected unless we see some real new ideas playing on their traditional strengths.

A small percent of a big number

I have taken a little time to get around to this, but a couple of weeks ago the Productivity Commission released a report into waste management. The blaze of publicity centered around their conclusion that only 1 percent of all plastic bags used in Australia find their way into streams and such, potentially choking wildlife to death. The PC reached the conclusion that perhaps a blanket ban on plastic bags would be over-kill. This is the kind of conclusion that economists normally latch onto -- you know, policies should have a proper weighing of costs and benefits. See Harry Clarke for an example and The Age for a write-up.

Now I was curious about this one because all of the reports reported the 1 percent (a small number) and concluded that plastic bags were a small problem. But 1 percent isn't a number at all, but a ratio. So what is the number?

Well buried deep in the PC report is the total number of bags consumed by Australians per day: 8 million. So that means that 80,000 bags a day are going into streams and such. That translates to 3 million per year. Now that seems to me like a big number. In 2005, this number was 34 percent less than 2002 because of the campaigns against plastic bags; that is 1 million less. (According to other sites, the total might actually be many times higher perhaps of the order of 60 million).

The issue with regard to the 1 percent, therefore, is that it doesn't tell us whether plastic bags are a problem or not. The magnitude will tell us more about the cost. But it does tell us that policies designed to reduce overall plastic bag usage might be hitting at the wrong end of the problem. Instead, we likely need to spend money limiting the amount of plastic bags that enter into streams. That would directly hit upon the cost.

[Of course, it could all be because of a few offenders and not general practices. In this case, we need even better targetted policies. See this New Yorker article by Malcolm Gladwell for more].

Tuesday, May 30, 2006

Starting out elsewhere

New research on the career paths of academic economists tells us pursuing careers in Australia something very important: consider starting your career elsewhere. Stanford's Paul Oyer has studied the career paths of economists conditioning on the status of their initial job placement. Now of course initial job is an indicator of quality but it also is driven by other factors; principally, the state of the academic labour market. When there is high demand for faculty, an individual will likely get a higher placed job as compared to situations were there is low demand. Come out in a boom year and you have a 40-60% greater chance of ending up in a Top 50 department later in your career or getting a Top 5 publication in your first decade.

There have been a few write-ups about this paper recently (see, for example, Joel Waldfogel in Slate; Greg Mankiw; and Mark Thoma). All have the advice work hard early or you're stuffed. That is nice but you could also have advised people to change their surname to an earlier name in the alphabet because we do not really know why the market for academics appears to be operating based on random factors and not more efficiently sorting.

Now the argument being made of course is that after the fact there is efficient sorting and that initial placement actually affects academic productivity. In that case there is a cautionary tale for those starting out. As I sit here well outside the top 50 (at 106 according to the measure Oyer used) I figure I might be able to offer a different perspective.

If I were to guess, the main distinguishing factor is the research environment. As you move from the Top 50, the time available for research diminishes greatly. Teaching loads are higher and in smaller departments so are administrative loads. In my initial job at the University of New South Wales (ranked 135) the teaching loads at the time (I was there from 1994 to 1996) were extreme. In the semester before I left I was teaching between 12 and 18 hours a week (mostly lectures) across 5 different subjects. I taught in 8 different courses ranging across macroeconomics, microeconomics from 1st year undergraduate to PhD. Not surprisingly, it was rather difficult to get things done. Hopefully, things have improved since then for junior faculty. (At the time, senior faculty had lower teaching loads).

The reasons why I moved to Melbourne should be obvious but it is a very different environment here. In both the Business School (where I am) and the Economics Department teaching loads for research active faculty are very low; especially compared with simlarly ranked institutions. And it wasn't until I came here that I was able to hit top tier journals. The experience of my colleague Catherine de Fontenay who made a similar move also attests to this.

So my advice to those starting out is to value your time appropriately and make sure you have guarantees regarding your teaching load. My strong guess is that is the critical variable driving Oyer's findings.

[PS. Oyer relies on the ranking provided by econphd.net for his study. It is based on the quality of publications of a department's top 15 authors. Econphd.net is a great resource for those choosing PhD programs and was established by University of Melbourne economics PhD student Christian Roessler. Someone to watch out for on the market soon.]

[PPS. You might wonder why I went to UNSW first. Well, I had a Fulbright Scholarship that required me to come back to Australia. I did and have been very happy overall with that (especially for my personal life!). Of course, Oyer's study suggests that you might think twice about taking one of these scholarships.]

[PPPS. All of this only enhances the rationale for free immigration amongst academics].

Monday, May 29, 2006

Optimal supermarket queuing

Economists think alot about queues whenever they are standing in them. For example, Steve Levitt became preoccupied with Disneyland queues earlier this month.

Today, my co-author, Andrew Leigh recounts his supermarket experience. He ponders the difficult issue of what line to stand in and concludes that it may be best to make your assessment, go to the nearest queue and stick to it. Queue picking is a hard issue. It is a little like an auction. You are observing check-out's bids for your patronage. The shorter queue reflects supply and demand. It may be short because checking out is efficient or it may be short because others have worked out that it is hopelessly inefficient. What is the truth also depends upon the ratio of queues to queuers.

This means that a static assessment of your options is not enough to make a long term judgment. You need to observe the dynamics of the situation before you can judge and you may want to update and change queues. The problem is that involves a switching cost as you have made a sunk investment in a particular queue and would be forced to go back to the start by re-optimising.

What you need to make this all much better is one of the following:

  • Real markets: you should be able to pay to get a better place in the queue. See this article in Slate.
  • Reverse queuing: Steven Landsburg in Slate suggested that we might change the convention and have arrivals to queues go to the front rather than the back. His issue is that everytime someone joins a queue that imposes costs on those who come later. That won't happen if people can join the front of the queue. In the context of supermarkets it would be those at the back of the queue jumping around to see if they should join a longer queue; assessing the speed of the checkout and so forth.
  • The one queue hypothesis: queuing theory tells us that having many check out queues is hopelessly sub-optimal. Better to have a single queue leading to multiple check outs as they become available. Average waiting times are much much less.
  • Crying children: the best way to improve your own waiting time is to have a crying child. If your child is not crying, do something to make them cry. I can tell you that it works a treat. No one wants to stand in a long queue with a crying child and you can move to the front so minimise that pain.

In Hansard ...

Earlier this month I testified before the Australian Parliament on the impact of the Reserve Bank's credit card reforms. For those of you who can't get enough of this, the transcript is now in Hansard. Click here to download the day. I start at about page 20 and blather on for about 8 pages.

Updated Web Page

It has been about 6 years since I have done this but I have redesigned by academic home page. Click here to see the result. The idea is to make it a more 'living document' than I had previously with more about 'what's new' than 'what's old.'