Comments on economics, mystery fiction, drama, and art.

Wednesday, April 26, 2006

Jane Jacobs

Jane Jacobs, who wrote prolifically about the problems and the greatness of cities has died. In The Death and Life of Great American Cities (perhaps the best book ever written about cities), she proposed a vision of urban vitality that incorporated crowding, street life, and diversity, and, in doing so, she changed the way we think about cities. She influenced generations of urban economists, urban sociologists, and urban planners. Proof that ideas, and the creators of ideas, matter.

The New York Times obituary is here.
Slate's obituary is here.

Wednesday, April 19, 2006

Drugs...or something else?

This is my contribution to the Barry Bonds discussion, and spins off something Malcolm Gladwell posted in his blog. The home run data I have posted below are for a real player. The age 31 to age 34 stuff might just be a normal age-related performance decline, someone who has been an outstanding power hitter slowly declining to merely above-average. But beginning at age 35, something odd happens--there's a power surge, which continues through age 39, with his career peaks in homers per 600 plate appearances coming when he was 37 and 39. His walks also spiked, rising from about 60 per 600 PA at ages 31-34 to about 90 per 600 PA from ages 37-39. So how would we explain this? Any takers?


In case you're curious, this was Hank Aaron...

Summer Jobs

Over at Confessions of a Community College Dean, Dean Dan laments his worst summer job (working in an ice fatctory). I started thinking about the summer job I remember best. It's a job that has provided me with a story I still use when I teach.

In the summer fo 19x8, I worked as a retail route salesman. I was a milkman. Three routes, two days a week each. We got paid 17% of what we collected. I replaced a guy who got fired because he'd done a pretty decent job selling milk, but a truly crappy job colecting for it. I realized quite quickly that my job that summer was to collect for milk that had already been sold. So I found myself knocking on doors in some not-so-nice neighborhoods in Indianapolis (near-east-side, near-northeast-side, and near-northwest-side), and asking for money. And people gave me money. I suspect that come of them might not have actually owed the company anything, that they had moved in after my predecessor got fired and before I started, but they paid. By the end of the summer, my three routes went from being in the top 10 unpaid balances to being in the bottom 10 unpaid balances. But I solicited no new customers, and I did nothing to encourage existing customers to buy more.

The lesson I use when I teach? That incentives matter, and that it's important for companies to structure their incentives correctly. How I worked those routes was appropriate, given that I was only going to be there for three months. But I left my successor in a hole, with tiny unpaid balances to collect. Had I expected to be there longer, I would have acted differently.

And should I mention than one of my customers was a house of ill repute? Probably not.

Friday, April 14, 2006

The World is.....Flat?

I can't recommend strongly enough Ed leamer's (lengthy) review of Thomas Friedman's The World is Flat. (Hat tip to Marginal Revolution)

Monday, April 03, 2006

In Defense of the University--Tenure and All

This, from Marginal Revolution, from Tyler Cowen's book Good and Plenty:

"The university also injects diversity into the broader societal discovery process. Faculty tenure is based on two principles: free inquiry and intellectual autonomy. Taken together, these principles also could be described by the less favorable sounding phrase "lack of accountability." A tenured faculty member simply is not very accountable to deans and department chairs. This absence of accountability, while it comes under heavy criticism, is part of the virtue of the university. The university works by generating and evaluating ideas according to novel and independent principles, relative to the rest of society."

And there's more there--and in the book.

The Indiana Toll Road, Once Again

Daniel Gross, writing in Slate, discusses the Indiana Toll Road lease. He is, as usual, insightful. I still have my doubts, however, about analyses such as this:

"What's in it for the foreign companies? Huge potential profits. Gigantic, steady profits. Toll roads are an incredible asset class. They're often monopolies. They can support debt, since they provide a recurring guaranteed revenue stream that is likely to rise over time, as more people take to the roads and tolls increase. According to Cintra, the Indiana Toll Road generated $96 million in revenues in 2005, and Cintra expects a 12.5 percent internal rate of return on its investment."

Cintra is paying $3.85 BILLION up front for this lease. And they expect a 12.5% internal rate of return. If I can still do arithmetic, that's more than $400 MILLION per year in net income from the lease.. From a toll road currently generating only $96 MILLION in REVENUE (before any costs). And Cintra will be responsible for the operating costs, maintenance, and at least some expansion costs. The more I look at the numbers, the more I think it's a better deal for the state of Indiana than I originally thought.