Knowing and Making

I celebrate the good news that  Bletchley Park has been saved  by my new friend @Dr_Black among others. It's a good story and you should read it if you aren't familiar with the background. However, is it wise to announce and frame the news in this way? The post suggests an optimistic transition: I mentioned "Saving Bletchley Park" as part of this conversation and Simon said "...hold on, Bletchley Park is saved, there is no way we are going to shut now with all the support that we have. What we need to talk about now is Building Bletchley Park for the future". I sat there with a big smile on my face... Bletchley Park is Saved - It is no longer about *Saving* Bletchley Park but about *Building* Bletchley Park. It sounds great. But surely it is much easier to raise money to "save Bletchley Park" from an impending emergency than to "build Bletchley Park" for an undetermined future? I predict that, unfortunately, donations will fall if the...

This week's word cloud from the economics blogs. I generate a new one every Sunday, so please subscribe using RSS or the email box on the right and you'll get a message every week with the new cloud. The words moving up and down the chart are listed here . I summarise around four hundred blogs through their RSS feeds. Thanks in particular to the Palgrave Econolog who have an excellent database of economics blogs; I have also added a number of blogs that are not on their list. Contact me if you'd like to make sure yours is included too. I use Wordle to generate the image, the ROME RSS reader to download the RSS feeds, and Java software from Inon to process the data. You can also see the Java version in the Wordle gallery . If anyone would like a copy of the underlying data used to generate these clouds, or if you would like to see a version with consistent colour and typeface to make week-to-week comparison easier, please get in touch.

I read the following quote in an article about the near-crash of a 747 plane in San Francisco: "In the past months, we have had several operational incidents," airline jargon for close calls, W.J. Carter, chief of United's Honolulu-based pilots, wrote in a Feb. 23 internal memo to his flight crews. "Major accidents historically are preceded by a series of these seemingly unrelated incidents. This disturbing trend is cause for concern" I was immediately skeptical, because patterns like this are often not real. The " hot hand " effect - often seen in sports, especially basketball - is a kind of momentum effect, where a player who has scored lots of baskets in the last few minutes is thought to be more likely to score again. It intuitively makes sense that someone could be "on a streak" where they are playing at the peak of their ability - those times when every shot you attempt seems to go in. Equally there could be times when you just keep ...

A debate has been going on within economics (and in my head) about how the economy is changing. Tyler Cowen thinks there is a " Great Stagnation ": all the low-hanging technological fruit (trains, planes, automobiles) has been harvested; we've grown for the last thirty years by getting some efficiencies out of existing processes, but that has limits; and there's no new major new invention on the horizon which will transform living standards further in the coming century. Umair Haque says something similar in more provocative language: the old models are bankrupt, we need a new mode of life - moving away from consumption and towards eudaimonia . A bigger TV doesn't provide any more satisfaction, just a shallow, temporary endorphin hit and a status upgrade relative to some of your friends. [ Update : Umair comments on twitter that "my definition of eudaimonia is economic, not just psychological" ] But the default position of economists - including...

This week's word cloud from the economics blogs. I generate a new one every Sunday, so please subscribe using RSS or the email box on the right and you'll get a message every week with the new cloud. The words moving up and down the chart are listed here . I summarise around four hundred blogs through their RSS feeds. Thanks in particular to the Palgrave Econolog who have an excellent database of economics blogs; I have also added a number of blogs that are not on their list. Contact me if you'd like to make sure yours is included too. I use Wordle to generate the image, the ROME RSS reader to download the RSS feeds, and Java software from Inon to process the data. You can also see the Java version in the Wordle gallery . If anyone would like a copy of the underlying data used to generate these clouds, or if you would like to see a version with consistent colour and typeface to make week-to-week comparison easier, please get in touch.

Economics is useful not when it makes broad, one-sided assertions (markets are good; externalities are bad) but when it uses a model to give a firm, quantitative answer to a specific question. What difference will it make to the price in the milk market if one new supplier enters, producing 3 million litres a year? If I buy this piece of land and build a gas station, will I make a profit? What's the optimal price for me to sell my consulting services if I value my free time at £40/hour? Standard economics gives us models which - if we can find the right data to calibrate them - will answer all these questions for us. Behavioural economics does not. It can show us the existence of certain phenomena: hyperbolic discounting, framing and priming biases, misperception of risk, anchoring. But can it answer questions like these? How high a price should I post in my shop window to maximise the benefits of anchoring and minimise the number of customers who are put off from enter...

Davis, Figgins, Hedengren and Klein have put together an interesting survey of American economics professors - asking about their favourite economists, alive and dead, and about the journals and blogs they read. I downloaded the data behind the paper in the vain hope that this blog might be among the long tail of responses not reported in the main paper (it wasn't). But the data does provide lots to think about. An intriguing point (from a survey design point of view, at least) is raised by one of the questions. The survey asked people to choose their most respected/admired economists from two groups: over 60 years old and under 60. I don't know about you, but I'm not sure I'd know the age of many of the economists I admire. I speculate that the respondents might have subconsciously chosen economists who are much older, or much younger, than 60 years of age, in order to answer these questions with greater certainty. Even if aware of this potential bias, I might ...

This week's word cloud from the economics blogs. I generate a new one every Sunday, so please subscribe using RSS or the email box on the right and you'll get a message every week with the new cloud. The words moving up and down the chart are listed here . I summarise around four hundred blogs through their RSS feeds. Thanks in particular to the Palgrave Econolog who have an excellent database of economics blogs; I have also added a number of blogs that are not on their list. Contact me if you'd like to make sure yours is included too. I use Wordle to generate the image, the ROME RSS reader to download the RSS feeds, and Java software from Inon to process the data. You can also see the Java version in the Wordle gallery . If anyone would like a copy of the underlying data used to generate these clouds, or if you would like to see a version with consistent colour and typeface to make week-to-week comparison easier, please get in touch.

This week's word cloud from the economics blogs. I generate a new one every Sunday, so please subscribe using RSS or the email box on the right and you'll get a message every week with the new cloud. The words moving up and down the chart are listed here  (new entry "Osama" is only at number 413! Update:  "Laden" is a new entry at 165 and "bin" up 558 places to 97, so I'm no long as surprised as I was) I summarise around four hundred blogs through their RSS feeds. Thanks in particular to the Palgrave Econolog who have an excellent database of economics blogs; I have also added a number of blogs that are not on their list. Contact me if you'd like to make sure yours is included too. I use Wordle to generate the image, the ROME RSS reader to download the RSS feeds, and Java software from Inon to process the data. You can also see the Java version in the Wordle gallery . If anyone would like a copy of the underlying data used to ge...

Alan Sugar has belatedly discovered an important economic concept: the idea of incidence . The star of The Apprentice and former owner of Tottenham Hotspur has just realised that when new income pours into a competitive industry which relies on scarce resources, incumbent companies don't get to keep the money. The standard example of this in economics is farm subsidies. Although one might think farm subsidies are good for farmers, that is not really true. Because there's a fixed supply of farmland, whose price is determined by how much money a farmer can generate from it, all of the extra money is - eventually - captured by landlords in higher rents. Farmers might benefit in the short term, as this paper suggests , but when their leases are up for renewal the rent will go up. Football is no different - there's a limited number of talented players, and all the clubs want to buy them. So now that the Premier League makes £2 billion a year (twelve times the amount of 20...

This week's word cloud from the economics blogs. I generate a new one every Sunday, so please subscribe using RSS or the email box on the right and you'll get a message every week with the new cloud. The words moving up and down the chart are listed here . I summarise around four hundred blogs through their RSS feeds. Thanks in particular to the Palgrave Econolog who have an excellent database of economics blogs; I have also added a number of blogs that are not on their list. Contact me if you'd like to make sure yours is included too. I use Wordle to generate the image, the ROME RSS reader to download the RSS feeds, and Java software from Inon to process the data. You can also see the Java version in the Wordle gallery . If anyone would like a copy of the underlying data used to generate these clouds, or if you would like to see a version with consistent colour and typeface to make week-to-week comparison easier, please get in touch.