Sentence of the day: Exchange rate edition

Matthew Yglesias:

Meanwhile, since voters are strongly nationalistic and strongly confused, they think a “strong dollar” is good but that “Chinese currency manipulation” is bad, even though the point of Chinese currency manipulation is to make the dollar strong.

Revealed preferences

Steven Sinofsky writes in the outstanding Building Windows 8 blog:

Few operations in Windows are as scrutinized, measured, and picked apart as boot. This is understandable—boot times represent an effective proxy for overall system performance and we all know the boot experience is an incredibly important thing for us to get right for customers. Data shows that 57% of desktop PC users and 45% of laptop users shut down their machines rather than putting them to sleep. Overall, half of all of users shut down their machines rather than putting them to sleep.

See, my interpretation would have been: The 57% of desktop PC users who shut down their machine instead of putting it to sleep must not care very much about boot time. Otherwise, they would just put the damned thing to sleep instead.

I guess that’s why I’m not in charge of Windows 8.

Don’t look down, Wile E. Coyote!

The Harvard Business Review’s Daily Stat of July 21, 2011, titled “Many Waitstaffers Say Tips Don't Reward Service”:

30% of waiters and waitresses said in a survey that they believe the level of service they provide has no bearing on the tips they receive, a finding that suggests restaurants should query job candidates about their beliefs on this subject, according to a team of researchers led by Michael Lynn of Cornell.

The suggestion that “restaurants should query job candidates about their beliefs on this subject” suggests, to me, that restaurants should select candidates who believe that better service will result in higher tips. Presumably, such waiters and waitress will deliver better service in their quest for higher tips.

But better service doesn’t result in higher tips. At least not much. A recent episode of NPR’s Planet Money covered tipping with the same researcher, Michael Lynn, who said that there’s a “pretty weak relationship” between service and tipping:

Studies have found for example that the amount of sunshine outside have as big an impact as the tips customers leave as the customer's ratings of service quality.

So the HBR is recommending that employers avoid hiring candidates who have a rational understanding of their industry’s (irrational) economics. Pick the guy or gal who goes with “common sense” instead.

The unfortunate thing is, it’s probably good advice.

Sentence of the day

“Myth of the rational firm, redux” edition

Michael Reichmann at Luminous Landscape:

The reason that Sigma priced the SD1 at almost $10,000 is because someone senior in the company responsible for such decisions mistakenly figured that this was a good idea.

Slate discovers “consumer surplus”

Annie Lowrey writing in Slate:

It sounds ridiculous, but many economists would love to run this experiment. That is because they suspect that our computers are worth, in some strange way, more than what we pay for them.

Strange? You mean like every other good that people purchase voluntarily?

Sentence of the day: “Myth of the rational firm” edition

Freakonomics Blog on pricing chicken wings:

After all, firms are made up of people, and if people are confused most of the time by economics, why wouldn’t that carry over to firms?

Content sellers: Sell the content…

…not the means of access.

Yesterday the New York Times announced their long-anticipated paywall pricing scheme. Per four weeks:

• $15 for web site and mobile phone app
• $20 for web site and tablet app
• $35 for web site, mobile phone, and tablet

You read that right. If you want to read the same stories on your iPhone and your iPad, you have to pay full price for each. No discount. You even get to pay for the web access twice!

This is ridiculous.

If you’re selling content, sell the content. Stop nickel-and-diming us for every different means of accessing it. Nobody likes that. Amazon’s Kindle platform gets it right. Tell me how much I have to pay to read your stories, and let me read them from whatever device is convenient.

Charging full price for each additional access mode is even worse. Accessing the same content two ways is not twice as valuable as accessing it one way. Cooks Illustrated does the same thing thing, and it’s always pissed me off. I want to read the new, printed magazine in bed, and I want electronic access to the recipe and review archive. But, no, if I want both of these things, I have to pay full price for each. There’s no discount for bundling.

Publishers have seen the downside to digital distribution, as their revenues decline. It’s time to embrace the upside, the near-zero marginal cost of delivery, and give readers what they want.

The Great Stagnation: Snack bar implications

Economist Tyler Cowen of Marginal Revolution recently released a short work of non-fiction called The Great Stagnation. The central thesis is that the 20^th century was an unusual time of technological “low-hanging fruit” that greatly improved everyday life with relative ease (automobiles, electricity, etc.). We face a “Great Stagnation” where the relative improvement of life for the average person will be quite modest in comparison. We’re not going to see the revolutionary improvement we’ve become accustomed to.

He may be right.

iAd ante drops 1 octave; 12 to go

Apple has reduced the minimum buy-in for its iAd mobile advertising platform from $1,000,000 to $500,000 to attract “smaller” campaigns.

I’m astonished that it was, and is, so high. Since one of the advantages of the platform is location-based targeting, I would expect small local businesses like restaurants to want to advertise. But the buy-in has to be realistic for small businesses—more like $100 to start. And the iAd platform is well below capacity; the fill rate has been under 10% recently.

Google’s AdWords platform, by contrast, has no minimum campaign budget. I’ve played around with it for $10 or $20, just to learn how it works. I wonder why two smart, successful companies chose such different approaches for this parameter.

On cosmetology and cosmology

Via See the Invisible Hand, the Wall Street Journal reports on the escalating licensure requirements for many jobs:

Texas, for instance, requires hair-salon “shampoo specialists” to take 150 hours of classes, 100 of them on the “theory and practice” of shampooing.

By way of comparison: I have a bachelor’s degree in physics and a Ph.D. in astrophysics. Shampoo specialists spend more lecture hours learning “the theory and practice of shampooing” than I did on thermodynamics and solid state physics, combined.

Technological progress in cookery

There’s a been a blogospherical discussion about the level of recent technological progress in home cooking. Krugman and Cowen have written on the topic, but I found Megan McArdle’s contribution to be most interesting thus far, perhaps because she’s an avid home cook. Most of her post rings true to me, especially this:

The most interesting sentence I read today

By Karl Smith of Modeled Behavior, in “Unlike Immigrants, Robots Will Permanently Drive Down Real Wages”:

Our intuition places a really high value of materials and a comparably low value on human time.

Confessions of a market manipulator

From RISKS 26.19, Financial market automated amplification of trades:

"The two men worked out how the computerized system would react to certain trading patterns—allowing them to influence the price of low-volume stocks." Although the article gives no indication of how they did it, the day traders “gave false and misleading signals about supply, demand and prices'', which caused the robots to take action—which the day traders then took advantage of.

Yeah, I did that once.

My neutrons bring all the boys to the yard

Sometimes I miss Atherton Hall. Schreyer Honors College to auction off dates for charity:

Roommates Hannah Spece (freshman-nuclear engineering) and Uma Pattarkine (freshman-finance) will be auctioned off together.

“I like that all the proceeds are going to the Susan G. Komen foundation,” Spece said. “It’s also cool because we plan on walking in to the song ‘Milkshake’ by Kelis.”

That’s the most authentically Athertonian quote I’ve seen in the Daily Collegian since 1994, when Stan Briczinski (freshman-physics) said:

The most interesting thing I read today

By Adam Ozimek at Modeled Behavior (link shortened to obscure the context; see if you can guess):

Our desire to have costs hidden from us is a very expensive preference.

Where else do we observe this preference?

In this context, what does the European preference for VAT-inclusive pricing tell us, compared to the US custom of ex-sales-tax pricing?

Music industry quote of the day

BMI spokescreature Jerry Bailey quoted in the Johnstown Tribune-Democrat:

Songwriters make a living a penny at a time, or a fraction of a penny at a time.

On the effort of high-earners

Greg Mankiw is the latest to claim that an increase in the high-income tax rate will induce high-earners to withhold their labor from the market, because it’s not “worth it” to work so hard. I don’t buy it.

The Occasional WTF #2

Value(Cheese XOR Bacon) == –$0.05
Value(Cheese AND Bacon) == +$0.75

We can deduce that cheese and bacon are exceedingly complementary goods, but only in the context of the Angus Beef hot dog.

(The menu board at the shop had entirely different, but still crazy, prices for the toppings.  I’m going from memory, but “Cheese or Bacon” was something like a $0.25 surcharge, while “Cheese and Bacon” was $1.00 more than that.)