Submit a link Features Reviews Podcasts Video Forums More ▾

RIP, Ronald Coase

Ronald Coase, Economics Nobel Laureate and author of the 1937 classic Nature of the Firm, has died at 102. Coase's arguments about the problems of transaction costs and the opportunities that arise from lowering them are at the heart of the Internet's impact and have never been more relevant. Cory 2

Bullshit jobs: why we're not all working 4h days


David Graeber, who wrote last year's incredible Debt: The First 5,000 Years, has an extraordinary essay up called "On the Phenomenon of Bullshit Jobs," which explores the phenomenon of people in productive industries (nursing, teaching, etc) being relentlessly ground down on wages, job stability and working conditions; while all the big money aggregates to the finance industry and a layer of "bullshit jobs" like corporate attorneys, administrators, etc -- who do jobs that produce no tangible benefit.

Read the rest

What FRPGs can teach us about gold

"Look at games like World of Warcraft, Diablo, Dungeons and Dragons, or the original Final Fantasy. In those games, gold is the money, and you often get gold not by doing an honest day's work, but by running around and beating people up and taking their gold. In other words, the entire world of modern fantasy role-playing is a subtle joke on gold's unsuitability as a medium of exchange." -Noah Smith (via Making Light)

What happens when actual prisoners play The Prisoner's Dilemma?


Photo: businessinsider.com

The Prisoner's Dilemma is a basic part of game theory. Two prisoners are given the choice between informing on the other, or staying silent. They can't communicate with each other. The choices they make determine how many years in prison they both get.

This analogy/brain game is often used to demonstrate the ways that different people can work with or against each other in economic and social situations. Now, for the first time, scientists have done a study based on The Prisoner's Dilemma that used real prisoners. Instead of time off their sentences, they were given the choice of competing or cooperating to earn goodies like coffee and cigarettes.

And here's the surprise: Compared to college students, the prisoners actually cooperated with each other much more often.

Just having a college savings account can increase chances of a kid going to college

And that's true even if the savings account doesn't have enough money in it to cover a full degree — or even a semester. A study from Washington University in St. Louis has attributed this effect to aspirations. A kid who grows up knowing that their parents and others expect high education — and who grows up thinking about higher ed as an option for them — is more likely to go. That makes sense to me. Anecdotally, my grandparents sold a cow when I was born and put the money into a savings bond college fund. It wasn't much when I turned 18. But it was part of creating a family culture that made college something I planned on doing. The catch to this idea, of course, is the rising cost of college. I was lucky enough to attend school in a time and place (1999, Kansas) where my freshman year only cost me about $2000 a semester. Maggie 13

Hating Millennials - the prejudice you're allowed to boast about


Cartoonist Matt Bors got a spot on CNN for his great, scathing critique of the narrative of the lazy, narcissistic "Millennials," which has gone well beyond "get off my lawn" territory and into the realm of out-and-out demographic prejudice. Click through for the whole thing.

The generation we love to dump on (via Geeks Are Sexy)

Maps of corporate tax-avoidance hairballs


OpenCorporates has a data-visualization tool for peering into the corporate tax-evasion structures of big corporations -- subsidiaries nested like Russian dolls made from Klein bottles:

In Hong Kong, there's a company called Goldman Sachs Structured Products (Asia) Limited. It's controlled by another company called Goldman Sachs (Asia) Finance, registered in Mauritius.

That's controlled by a company in Hong Kong, which is controlled by a company in New York, which is controlled by a company in Delaware, and that company is controlled by another company in Delaware called GS Holdings (Delaware) L.L.C. II.

...Which itself is a subsidiary of the only Goldman you're likely to have heard of, The Goldman Sachs Group in New York City.

That's only one of hundreds of such chains. All told, Goldman Sachs consists of more than 4000 separate corporate entities all over the world, some of which are around ten layers of control below the New York HQ.

Of those companies approximately a third are registered in nations that might be described as tax havens.Indeed, in the world of Goldman Sachs, the Cayman Islands are bigger than South America, and Mauritius is bigger than Africa.

Tim Harford's 2011 book Adapt proposes an ingenious regulatory solution to this problem, explaining how it might have been applied to companies like Lehman, whose complex structures drew out the post-bankruptcy mess for years and years. He suggested that if banks were stress-tested to determine how long they'd take to sort out after a bankruptcy, and then required to keep reserve capital necessary to run all operations through that whole period, they would be strongly incentivized to have the most simple, transparent corporate structures. Otherwise, they'd have to tie up billions of dollars in escrow to keep the doors open in the event that it all collapsed.

OpenCorporates | How complex are corporate structures? (via JWZ)

Lunch with the Financial Times

The Financial Times has regular feature called Lunch with the FT in which a columnist takes someone out for lunch and a long chat, and then reports on both the lunch and the talk. I sat down recently with Tim Harford for very nice steaks and cheap wine, and Tim's just written it up:

Doctorow is clearly fascinated by economic issues, and points out that most science fiction and fantasy economies make no logical sense. The exception, he declares, is when Marxists write science fiction or fantasy. Take the recent Hobbit movie, for example. “How can the goblins have a mine that’s so inefficient?” he laughs, as he pauses from ripping the soft flesh from the marrowbones on his plate with his bare hands.

The porterhouse steak arrives, pre-sliced. It’s very good, charred on the outside but soft and pink beneath the surface. Doctorow has asked for horseradish while I am dipping my steak and chips into béarnaise sauce. The conversation is animated enough to slow our progress, and neither of us raises an eyebrow when a waiter noisily drops something fragile on the other side of the dining room.

So, I ask, if only Marxists get economics right in their novels, does that make Doctorow a Marxist? There’s a tension there, somehow – he’s a successful player in the market economy and fluently speaks the language of business; of profit, marketing reach, margins, and price discrimination. But his political activism seems squarely on the left – pro-labour, pro-equality, pro-rights.

“Marxists and capitalists agree on one thing: they agree that the economy is important. Once we’ve agreed on that we’re arguing over the details,” he says.

Plus, check out that caricature!

Lunch with the FT: Cory Doctorow

Spies clean up in Eve Online

High drama from the world of Eve Online, where a week ago, a spy stole 400 billion ISK, and this week, a trusted player who was secretly a spy masterminded the destruction of a rare ship worth 390 billion ISK (the in-game currency, not to be confused with Icelandic Krona). Eve is notorious for high-denomination economic shenanigans, including a credit crunch, a massive Ponzi scheme, large-scale espionage, another Ponzi scheme, and more. Cory 15

Bubblenomics: how the Beanie Babies speculators got it wrong


Buzzfeed's Hunter Schwarz revisits 1998's "Scholastic Beanie Baby Handbook," which predicted values of Beanie Babies in 2008, and compares them to the current-day eBay clearing price for these same speculative items. For example, the Stripes the Dark Tiger doll, which retailed for $5 and traded for $250 in 1998 was predicted to rise to $1,000. Today it can be had on eBay for $9.95. And the $4,000-$5,000 estimated 2008 value for the Violet Teddy was also way off, though Violet is today a $700 item ($700 was also what it traded for in 1998).

How Much Beanie Babies Were Predicted To Be Worth Vs. How Much They’re Really Worth (via Digg)

Why health insurance makes no sense

Two doctors have written a really fascinating analysis of the history and economics of health insurance that will make our current U.S. system seem even more ridonculous than it already did. Maggie

Austerity: the greatest bait-and-switch in history

Mark Blyth, a delightfully sweary Scottish economist, talks for about an hour to Googlers about the stupidity of austerity as a means of recovering from recession, describing it in colorful, easy-to-grasp language. This is brilliant, accessible and important economics:

Governments today in both Europe and the United States have succeeded in casting government spending as reckless wastefulness that has made the economy worse. In contrast, they have advanced a policy of draconian budget cuts--austerity--to solve the financial crisis. We are told that we have all lived beyond our means and now need to tighten our belts. This view conveniently forgets where all that debt came from. Not from an orgy of government spending, but as the direct result of bailing out, recapitalizing, and adding liquidity to the broken banking system. Through these actions private debt was rechristened as government debt while those responsible for generating it walked away scot free, placing the blame on the state, and the burden on the taxpayer.

That burden now takes the form of a global turn to austerity, the policy of reducing domestic wages and prices to restore competitiveness and balance the budget. The problem, according to political economist Mark Blyth, is that austerity is a very dangerous idea. First of all, it doesn't work. As the past four years and countless historical examples from the last 100 years show, while it makes sense for any one state to try and cut its way to growth, it simply cannot work when all states try it simultaneously: all we do is shrink the economy. In the worst case, austerity policies worsened the Great Depression and created the conditions for seizures of power by the forces responsible for the Second World War: the Nazis and the Japanese military establishment. As Blyth amply demonstrates, the arguments for austerity are tenuous and the evidence thin. Rather than expanding growth and opportunity, the repeated revival of this dead economic idea has almost always led to low growth along with increases in wealth and income inequality. Austerity demolishes the conventional wisdom, marshaling an army of facts to demand that we recognize austerity for what it is, and what it costs us.

Mark Blyth: Austerity - The History of a Dangerous Idea (via Memex 1.1)

How markets allow people to violate their moral codes

Here's a press-release describing a paywalled paper in Science magazine, written by a pair of University of Bonn Economists. They conducted an experiment that showed how markets diffused responsibility for actions that ended up violating individual moral codes, so that people did things in market contexts that they had previously described as immoral when done individually.

"To study immoral outcomes, we studied whether people are willing to harm a third party in exchange to receiving money. Harming others in an intentional and unjustified way is typically considered unethical," says Prof. Falk. The animals involved in the study were so-called "surplus mice", raised in laboratories outside Germany. These mice are no longer needed for research purposes. Without the experiment, they would have all been killed. As a consequence of the study many hundreds of young mice that would otherwise all have died were saved. If a subject decided to save a mouse, the experimenters bought the animal. The saved mice are perfectly healthy and live under best possible lab conditions and medical care.

A subgroup of subjects decided between life and money in a non-market decision context (individual condition). This condition allows for eliciting moral standards held by individuals. The condition was compared to two market conditions in which either only one buyer and one seller (bilateral market) or a larger number of buyers and sellers (multilateral market) could trade with each other. If a market offer was accepted a trade was completed, resulting in the death of a mouse. Compared to the individual condition, a significantly higher number of subjects were willing to accept the killing of a mouse in both market conditions. This is the main result of the study. Thus markets result in an erosion of moral values. "In markets, people face several mechanisms that may lower their feelings of guilt and responsibility," explains Nora Szech. In market situations, people focus on competition and profits rather than on moral concerns. Guilt can be shared with other traders. In addition, people see that others violate moral norms as well.

"If I don't buy or sell, someone else will."

Markets Erode Moral Values (via Reddit)

Spirit Level documentary: how economic inequality is bad for the world

Here's a 2-minute preview of "The Spirit Level," a documentary based on the the bestselling book about the way that income equality is better for society, and how 30 years of economic policy has made everything much, much worse. The doc is funded by a successful Kickstarter, but they're still looking for pre-orders.

SpiritLevelDoc

Forging £1 coins is apparently profitable


Three men have been convicted of forging £1 coins. The London Police Detective Inspector even got all quippy about the sentencing ("These three men are organised criminals who were intent on undermining the UK monetary system. There is nothing fake about the reality they must now face of life behind bars." -- yes, yes, very clever DI South) but what fascinates me about the story is that it can somehow be profitable to forge £1 coins.

I got passed a fake pound shortly after I first moved to the UK, almost ten years go; it was a foil-wrapped plastic slug. Not realizing it was fake, I tried to buy something with it at a corner shop and the cashier pressed it edge-on on his counter and the foil split open, revealing the green plastic disc inside.

From the sound of this article, these fakes were solid metal, which, I think, would make them more expensive than the fake I got. When you add the costs of the materials, the wages for the manufacturing process, warehousing, the discount for counterfeit cash, etc, it's hard to believe that this was worth anyone's while.

On the other hand, it's probably easier to go on counterfeiting when you're passing very small denominations as most people (me included) won't bother going to the cops over a mere pound; and it's much harder to remember where a given pound coin came from than a £20 note.

The court heard Fisher, of Rags Lane in Goffs Oak, Hertfordshire, Sullivan, of Bancroft Chase in Hornchurch, east London, and Abbott were arrested during an undercover police operation in Essex last May.

Police found a storage container with 1.6 million metal discs inside and fake coins equivalent to £20,000.

Fake coins equivalent to a further £30,000 were found in a nearby car.

Three men jailed over 'largest' fake £1 coin plot [BBC]

(Image: Yet another forged pound coin, a Creative Commons Attribution (2.0) image from pahudson's photostream)