Knowing and Making

This may be the first time I've linked to a story in The Sun , but it illustrates a striking economic puzzle, so here goes: "[Cheryl Cole] will not be fighting for a huge settlement. She just wants to get out fast so she can press on with life and move on. "The initial advice is that it speeds up the process if there is no claim for money"...Cheryl hopes to keep the couple's £6million home. So wait...this transaction will be more  liquid with lower  transaction costs if it takes place in property instead of cash? This goes against all standard microeconomic theory, which strongly implies that cash transactions should be more efficient than barter. Cash is a fungible asset, highly granular, and any transaction involving other assets will be an imperfect match for the agent's preferences, reducing the available consumer surplus. What could be the explanation for this? Cheryl could be rationally giving up a potential material gain simply to reduce likely ...

If you didn't see the Italian Grand Prix on Sunday and you're still planning to watch it, look away now. But really . It's been three days. So for those who didn't see it and are not planning to watch it, think about this question. Should the order in which drivers are placed affect the aggregate happiness of all fans? (Assume for now that all drivers and teams have the same number of fans.) Surely not, right? No matter whether Rubens Barrichello wins or Robert Kubica does, people will be - on average - equally happy. There's a certain utility gained from your driver coming first, a lower amount for coming second, third, and so on. The total utility gained by all fans is the sum of U(first) + U(second) ... + U(20th), and the only difference is the distribution of happiness between people. And yet. On Sunday, Lewis Hamilton was running in third place and ready to get on the podium. He entered the last lap a couple of seconds behind Jenson Button and trying to catch...

Driving through the US it is slightly hard to believe that a place with such a vast and humming industrial economy could have a recession. But it's all relative, and it is entirely possible that the $60-70,000/head GDP of this region could decline by $2,000/head in a year or so. I was provoked to wonder about how the US economy can sustain what appears to be a much higher level of consumption and infrastructure than the UK. On the surface there are no great insights or mysteries here - the US has more natural resources and space, therefore needs to spend fewer resources on working around those shortages; it spends proportionally less on public goods, and (arguably) its infrastructure is of lower quality - built quicker but also decaying faster. People work more hours and therefore create more resources (which are included in GDP), but spend less time on leisure (which isn't). But I wonder to what extent this is not to do with explicitly differing preference, but with multiple e...