Archive for September, 2008

Reader responses: BIP! cards

September 30, 2008
Some time ago, I posted an open question about why Chileans keep such low account balances on their subway “BIP!” cards.
Glen and Alisha came back with fantastic responses, each worthy of their own post.
Alisha offers the cultural explanation (so like her..):
I’m sure that Glen gave you some rational explanation, but given that I’m a mere aspiring political scientist, I will give you a more interpretive response:
1)  Chileans love waiting in lines.  It gives them another form of oppression to discuss at work–I waited in line for 10 hours today and finally got on the metro…then I walked 8 miles through the pouring rain and smog after working a 15 hour day (with a 4 hour lunch break).

2) Chileans are irrationally afraid of crime.  Despite the safety of Santiago, they go nuts about crime, especially on the metro.  Maybe they think flashing a 10.000 peso bill will set them up to be pick pocketed (or at least get their Bip card ripped off)??  So maybe it’s strategic (or cool) to look poor among the rich, and then the poor are just poor so everyone gets miniscule sums on their metro cards.

Glen’s response was worthy for publication in minor journals of economics. He shows that it is economically rational for a Chilean to keep account balances as low as 1414 pesos. The full analysis is below — warning: The words “first-order conditions suffice for optimization” do appear. And .. oh lordy … it is glorious.

glens-response

Thanks Glen and Alisha!

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Assorted thoughts on the financial crisis

September 26, 2008
  1. I don’t understand the crisis. You don’t understand the crisis. 90% of the people writing about the crisis don’t understand the crisis (most guilty: Matthew Yglesias). You need a PhD and lifetime of work in finance / economics to understand the crisis and if this isn’t you then you don’t have the answers.
  2. My work mates were discussing whether this signals the beginning of the end for US hegemony.  Startlingly, the consensus was “yes” and no one challenged it. Laura volunteered “can we turn it back or is it too late?” Opinions were mixed. To me the other important question is “as a global society, do we want to turn it back?”
  3. Disruption always creates some chaos. Often it is followed by innovation. Call me optimistic, but I see this spurring a wave of innovation in the financial sector.  Katie sent me a quote: “Every financial system tests every regulatory system to destruction.” The idea that the financial system grows to put pressure on the bounds of the regularity system, requiring a new regulatory system seems very healthy to me. One step back, two steps forward. I hope.
  4. The executive compensation discussion is a red herring
  5. Related to 1) — given that our elected officials (who really have no more of a financial /economic background than you or I) are voting on this, I hope they have some smart advisers. Who is actually crafting these plans? Sure as hell isn’t the Senators themselves.
  6. $700 billion is a cartoonish and meaningless amount of money. Per taxpayer it is a few thousand dollars. We are not going to be sent a bill from the US government though. It will be debt financed like the Iraq War and pretty much everything else. If there was feedback between government apppropriations and tax bills, there might be more appetite for fiscal restraint. As it stands, this has more in common with personal credit card debt or a home equity line.  It feels like free money. If our tax bill went up in accordance to government expenditure (or if the future tax incidence was indicated on our tax form), this would all be more real.
  7. If enterprises are not, occasionally, failing are we being too risk-averse as a society and curtailing our potential economic growth? Occasional failure is probably healthy. Widespread failure certainly isn’t.
  8. Better safe than sorry: I am going to start building an Ark. Anyone selling 15,000 cubits of gopher wood?

Fear not

September 22, 2008

The Invisible Hand in Your Pants will return with a vengeance in the next couple weeks

Apologies for the lack of posting lately. You deserve better and your readership is important to us, even you Jeremy.

– Management

(For now .. find us on Google Reader)

Two questions surrounding receipts

September 7, 2008

1) What do waiters do when a customer adds the tip incorrectly on the receipt? Take the higher value or the lower one?

2) Why is there both a “tip” line and a “total” line on a receipt to begin with?  Isn’t one of those redundant? The tip implies the total and vice versa. Maybe a little arithmetic practice is good for keeping us sharp.

Re: Bathroom entrepreneurship

September 2, 2008

One more to add to Sam’s list: This one for the poor and rural:

A cheap, water-efficient toilet that does not require an extensive sewage system.