Knowing and Making

Despite Chris's warning , I went to Tim Worstall's book launch today. I even bought a copy which I will review on here when I have read it (on the bus tomorrow). But before that, I learned something nice from his answer to an audience question. Apparently, there's a clear relationship between GDP per head and population growth. We already know that people in poorer countries have more children, and the population of those countries grows faster. It seems that there's a measurable cut-off point: at $16,000 per head of GDP, fertility drops to around replacement rate (just over two children per mother) and the population stabilises. Which reminded me of another statistic I read recently: national happiness grows with GDP until a certain point, at which it levels off and people stop getting happier. That level? $17,000 per head *. Now perhaps there's something important in that $1,000 difference, but the two figures are within the margin of error for cross-coun...

Of course we are all just waiting for something really  exciting to come out of wikileaks. Everything so far is either predictable (Prince Andrew criticising the Serious Fraud Office investigation of British Aerospace) or predictable (the Saudi royal family don't like Iran). But in the meantime you can get some cute insights by reading between the lines. Here's my favourite of the day : IRANIAN SOURCE NAMES "U.K.-REGISTERED" COMPANY [ INSULTEC ] AS IRAN SANCTIONS-BUSTER 4. (S) Note: A quick google check revealed several companies with the name INSULTEC in the title - these may or not be affiliated. Based on the information provided by source (currently in Iran, where he frequently travels), one possible candidate could be "INSULTEC Chitral Ltd." I'm not sure if Google is the only authorised resource for US diplomats to find information, but "INSULTEC Chitral" returns nothing on Google apart from links to this wikileaks document. The surp...

I'd guess that most of us are relatively happy to pay more to fly on or around a holiday than at other times. I'm sure those who flew home for Thanksgiving or are planning to do so at Christmas did not expect to get the same price as they would for a Wednesday afternoon in October. Which makes this story  (FT, may need subscription) slightly surprising: India’s government has warned domestic airlines that it intends to crack down on “predatory pricing” after carriers sharply increased fares on popular routes during a recent festival, as overall passenger traffic surges. Indian travellers were outraged during the recent festival of Diwali – Hinduism’s biggest gift-giving holiday – when some carriers charged about Rs25,000 ($550) for a last-minute Delhi-Bombay round trip ticket, a route on which fares usually range from Rs10,000-Rs15,000. The price lift here is substantial (60-100%) but reasonably typical of the uplift on flights or train tickets in the UK market. Is it a si...

Rising German bond yields over the week since the Irish bailout have been interpreted ( here  and here ) as an increase in default risk to the German government. But surely there is another "risk" much more likely to explain this increase. And that is the simple risk of inflation. The Irish bailout must make inflation more likely - through one of two routes. One : ECB liquidity support, i.e. lending to Irish and other banks, might not be repaid - which will result in an effective increase in money supply unless the ECB then tightens monetary policy to reduce it, which would be politically quite difficult. The ECB lending is secured on bank assets, but we know that those assets might not be worth 100% of their nominal value. So in the case of a bank default, the ECB has printed a billion euros to buy an asset which repays less than a billion euros of principal. Two : monetary policy may be deliberately loosened, either to help reduce the pressure on sovereign borrower...

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 (this link may be temporarily down due to a server move - should be back within a couple of days). 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 t...

An article in BusinessWeek about the success of Amazon Prime contains this interesting revelation: One challenge was selecting the annual fee for the service; there were no clear financial models because no one knew how many customers would join or how it would affect their purchasing habits. The team ultimately went with $79 mainly because it's a prime number. We see this problem a lot with our clients - new product or service launches are one of the main occasions when people hire us for pricing advice. But I have never yet seen anyone argue for a price level because of whether it factorises! Other interesting points: Amazon Prime in the UK costs £49 (not a prime number) and is one of the few items that is cheaper  in the UK than the US. It also provides next-working-day delivery in most cases, rather than the two-day US service. But then, the UK is a smaller place and perhaps delivery services are cheaper in general here. Finally, a funny quote from, of all people, a profe...

Bruce Schneier ( via Farnam Street ) makes the by-now-unoriginal observation * that: ...we pick a defense, and then the terrorists look at our defense and pick an attack designed to get around it. Our security measures only work if we happen to guess the plot correctly. If we get it wrong, we’ve wasted our money. This isn’t security; it’s security theater. Probably true. But then, terrorism isn't exactly "real" either: by design, it's a theatrical exercise too. Or perhaps a reality TV show. The clue is in the name - terrorism isn't designed to kill people, it's designed to make them scared . Thus, if we design this game for terrorists to play, they can win it just by smuggling a bomb through the security measures, regardless of whether it goes off. Notice that all the recently-discovered terrorist plots - the shoe bomber, the underpants bomber, the soft-drinks bomber, the printer-ink bomber - have failed? If the goal is simply to make us worry, make us r...