Dec 23, 2009

Scroogenomics: Why you shouldn't buy presents for xmas

The guy behind the AER paper on the deadweight loss of Christmas, Joel Waldfogel, has decided to make a book about it. He "illustrates how our consumer spending generates vast amounts of economic waste--to the shocking tune of eighty-five billion dollars each winter and provides solid explanations to show us why it's time to stop the madness and think twice before buying gifts for the holidays".
Is he OK? I'm not's an audio interview where they discuss his measurements of the deadweight loss of Christmas over time and across countries, the motivations that people have for giving, and his ideas for encouraging charitable giving at the holidays. 

Dec 19, 2009

How much net for your gross or why marriage can have a return of up to 20%

Looking for a job is quite time consuming. Once you have singled out the jobs and places you are most interested in, you do your best to actually get an offer. And then you will be confronted with a number which is your annual gross salary. Apart from the exchange rate adjustment, and the adjustment for the respective price level an important difference is the gap between net and gross around the globe. The OECD collects data on taxes and social contributions which they use to calculate the tax wedge. While the exact difference between gross and net will depend on the wage and other things, the measure gives an indication about the potential difference across countries. It does not come as a surprise that Germany and Belgium perform much worse than say Switzerland or the US (things in Ireland might change...).
What is more striking is the respective change in the tax wedge once you marry and have children. Suddenly, Germany and Belgium do not seem to be that bad of a place anymore while things in France and Sweden change only marginally. Interestingly, most emerging markets do not discriminate that much and Greece confirms its rather odd ideas about how to design policies by favoring singles over couples with children. On the other hand the government of Luxembourg rewards your marriage with a salary increase of more than 20%! It would be interesting to see how many Belgian singles actually try to find a man/woman and a job in Luxembourg. The incentives are quite high since not only gross salaries are higher but you can increase your salary by over 30% even if your gross salary remains unchanged.

Dec 15, 2009

Trade vs Macro

"Most people who work in international trade tend to lose the thread when the discussion turns to exchange rates and the balance of payments; as I’ve sometimes put it, the real trade people regard international macro as voodoo, while the international macro people regard real trade as boring and irrelevant"

This is Krugman writing about the genious of Paul Samuelson.

Dec 14, 2009

Did drug money save banks in global crisis?

From the Guardian: Antonio Maria Costa, head of the UN Office on Drugs and Crime, said he has seen evidence that the proceeds of organised crime were “the only liquid investment capital” available to some banks on the brink of collapse last year. He said that a majority of the $352bn of drugs profits was absorbed into the economic system as a result…Some banks were rescued that way!

ht: Trebesch

The social value of (some) professions...

FYI it's calculated here in a report entitled "A bit Rich". The report is published by the New Economics Foundation, which is also famous for the work behind the Happy Planet Index.

Dec 13, 2009

RIP Samuelson

Paul Samuelson was once challenged by the mathematician Stanislaw Ulam to name a single proposition in all social science that was both true and nontrivial. Samuelson thought of a good answer: the principle of comparative advantage.

He died today, age 94. As Ricardo Caballero puts it, “We will miss him and his unmatched wit very much, but his intellectual legacy is enormous and perennial. The world is different today because he was with us for many years."

Dec 7, 2009

Southwest Airlines frames it right

Check out the discusion of this post for context!

An example to explain Purchasing Power Parity to students

Imagine 2 countries, symmetric in every respect. Each country has one restaurant and one consumer. In country A, meals are $10. In country B, $20. In country A, the consumer eats at the restaurant twice a year. In country B, once. Hence, both countries have a GDP of $20. At PPP exchange rates, countrty A is twice as rich. (And that doesn't even take into account the externalities of social interactions). I let you guess which countries I have in mind.

ht: Hozik

Dec 6, 2009

Free sex in Copenhagen

Prostitutes will offer free sex to delegates at the  UN climate summit in Copenhagen next week. It is not, as I first thought, an inititative of Denmark which cares so much about the success of the event that it wants to please the delegates as much as possible. No, it is not that prostitutes themselves care that much about climate change...Rather, they are protesting against the city hall distribution of postcards in Copenhagen's hotels that say "Be sustainable: Don't buy sex." The prostitutes will accept these postcards for payment. In your face city hall! Why such a move form city hall, when the service could have greased the wheels of negotiations, offering some pressure relief? I wonder what the penguins think.

Dec 5, 2009

Transatlantic baggage allowance

Airlines are all of a sudden (since September)  coming together in limiting their free baggage allowance in economy on transatlantic flights to one bag of 23kg! And they are charging $50 for a second bag! What is this conspiracy against the public? When I first started flying we could take 2 bags of 32 kg each. Then it went down to 2 of 23kg, and now just one! What is this decrease of quality of life??? It doesn't sound right to me, it should go the other way around.

Dec 3, 2009

Pirate stock exchange

Piracy is a lucrative business that has drawn financiers from the Somali diaspora and other nations -- and now the gangs in Haradheere have set up an exchange to manage their investments. (reuters)

One wealthy former pirate named Mohammed explains it best:  "Four months ago, during the monsoon rains, we decided to set up this stock exchange. We started with 15 'maritime companies' and now we are hosting 72. Ten of them have so far been successful at hijacking...The shares are open to all and everybody can take part, whether personally at sea or on land by providing cash, weapons or useful materials ... we've made piracy a community activity...Ransoms have even increased in recent months from between $2-3 million to $4 million because of the increased number of shareholders and the risks"
ht: freaknonomics