quarrel: Engraving of Thoth from the Luxor Temple. (thoth)

Jonathan Blow (Braid) and Markus “Notch” Persson (Minecraft) conspired to bring some game freakonomics to Twitter.

Take two hypothetical games. They’re identical except for how they’re supported. Game A doesn’t cost any money to play, and there’s nothing to buy within it either, but it includes ads. Game B has no ads, but you have to buy it to play it. It costs $10 up front.

If you were to play only one of these games, which would result in you spending more money on average?

According to Blow and Persson, it’s Game A.

I know what you’re thinking. You’re thinking this is mathematically impossible. How can the average of a bunch of zeroes be greater than the average of a bunch of tens?

But re-read the question. I didn’t ask how much you’ll spend on the game. I asked how much you’ll spend. Period. On anything.

The only rational reason Game A’s creator would monetize it via ads is if some ad company offered a deal comparable to what Game B is expected to make. And the main reason when that happens is that said ad company thinks it’ll be able to sell that ad space for even more money to outside businesses. And the main reason for those businesses to be willing to pay that much is that they expect the ads in question to generate an even larger increase in revenue than what they cost.

Now, sure, not all marketing campaigns result in a company bringing in more than $X of additional revenue for every $X it spent. Also, some expenses are like car insurance: people will have them regardless, and an ad will only change how they spend their money, not whether they spend. But as a general trend, advertising works. We know this because companies use it, and have for centuries.

So the safe bet is that, for Game A, a mathematically significant number of players really, truly will be influenced by ads to buy things they wouldn’t have bought if they hadn’t played this totally free game — so much so that the average ad-inspired expenditure across all players will likely average out to more than $10 a head.

A couple days later, Blow went on to tweet:

Sitting at a cafe overhearing a random person…try to explain tower defense games to his friend. It turns out the point was to explain how it seems lame to pay-to-win in an f2p game. I give this business model 1.5 more years. We need to make a "pay up front, no microtransactions, no ads" seal of quality that games can display or stick in their icons. (Also: this game will not ask you to rate it, or send push notifications of any kind, or refer you to other games).

He’s still pounding his “games should be honest about how much they’ll cost” drum, citing integrity and “non-lameness” as justification and alluding, once again, to the mathematical fact that any game that costs $X to acquire (for X ≥ 0) but also tries to get you to buy other things (whether it be by mentioning other games, popping up Coke ads, or offering more stuff for itself as In-App Purchases) will end up costing its players more than $X on average — and that makes the $X price tag a lie.

So could Mr. Blow’s pipe dream of unscrupulously ethical pricing pan out? Would his ambitions for non-deceptive up-front pricing in games survive contact with actual customers? Personally, I doubt it.

In February 2012, J.C. Penny shifted cold-turkey to a “Fair and Square” pricing strategy that got rid of all the seasonal sales, secretive discounts, web deals, preferred customer coupons, hidden surcharges, and so on — something that the CEO at the time called “fake pricing” due to how the price on the tag was almost never what the customer paid — and simply made prices much lower on average for everyone all the time. It failed so badly that the board of directors kicked that CEO out. The customers who used to seek out deals and only bought, say, a $20 shirt when it was on sale for $8 didn’t bother buying it now that it was always $9 because they didn’t feel like they were saving money anymore, and the impulse buyers who bought shirts regardless of price were now generating half as much revenue.

Distimo, an app metrics developer, stated that as of February, for every $1 spent to buy an app, $3 was spent to buy something from inside one. Giordano Contestabile, a business-type guy who’s worked for Popcap and ArenaNet, cited proprietary sources to update those figures to $1 and $19 as of August. In other words, these days only 5% of all revenue from apps is from people buying the app itself.

In light of all this, game developers are pretty much locked out of irreproachable levels of pricing integrity if they want to stay in business.

(to be continued)

quarrel: Engraving of Thoth from the Luxor Temple. (politics)

I live in the Seattle area, but my family is all on the East Coast. When I was home for Christmas, my ten year old niece waxed eloquent about the things her school was in the midst of teaching her about “the Western Region of the United States”. Or, rather, that’s what she did once she’d struggled to recall whether Washington State is in the “west” or the “northwest”, vacillated, then declared it irrelevant because I’d also lived in California for years, and that was clearly West.

Now that my status of “a Person who Currently or At One Time Lived in the Western Region” was firmly established, she posed me a question to which she already knew the astounding answer: what was the most popular breakfast in that part of the country? I pondered briefly and suggested that it might be huevos rancheros or something unsurprising like pancakes, but that I didn’t know for sure.

“It’s eggs and cactus!”

I told her I’d never heard of such a thing while I lived in California, and that, yes, some parts of some cacti are edible, but take it from me, it’s not a common or tasty enough ingredient to make “eggs and cactus” the most popular single breakfast food over an entire multistate area. (A bit of research after the fact shows that, yes, nopales con huevos is a real dish, and it’s trended upward since I moved to Washington, but I also browsed a half-dozen Google hits on “most popular breakfast” and I didn’t see the word “cactus” once.)

“No. It’s eggs and cactus.”

I pointed out again that I’d lived in the part of the country she was learning about and my personal experience didn’t match what she was telling me. I asked her how she got this particular fact. She muttered something about that’s what her teammate said and promptly changed the subject, so I presume this particular assignment involved research partners, and that her partner did a quick random search, wrote down the first thing she found, and now it’s a Fact because she read it somewhere, just like all the other Facts she reads about. And there is No Way my niece is going to do Extra Work! to double-check things and then even more EXTRA WORK!!! looking up the real right answers because that’s what her teammate was supposed to do, and anyway her teammate did look it up and it’s not my niece’s fault if the teammate got it wrong!

But that’s what you have to do with news in the real world: double-check it.

There’s been a lot of talk in recent months about how huge tax rates fixed our economy in previous dire times. There’s been lots of other talk about how they weren’t as high as some people lead us to believe. So I actually looked at some historical tax brackets via taxfoundation.org and irs.gov .

I learned a thing or two along the way.

  • The IRS has PDFs of tax forms online going all the way back to 1913 (plus one from 1864).
  • We got the concept of the standard deduction from France.
  • The Form 1040 instructions were only four pages long in 1945.
  • Tax rates aren’t the only thing that matters. Where brackets start and stop is just as important.
    • Raw bracket info doesn’t tell the whole story. There are often complications that must be taken into account if you want to determine your exact tax rate.
    • In 1989, there were officially only two tax brackets: 15% and 28%. But there was also a surtax on a midrange portion of the 28% bracket. As your income climbed into this sub-bracket, the surtax eventually canceled out the amount you “saved” by paying only 15% in the low bracket. The net effect was that, if you earned enough, you effectively paid a flat tax of 28% on everything.
    • In 1945, there was an extra rule that you could never owe more than 90% of your total income, so eventually you got so far into the 94% bracket that you hit a breakpoint and your marginal rate dropped back to 90%.
  • You don’t get to count deductions before calculating Social Security or Medicare taxes. I’m embarrassed to say I didn’t already know this.
  • Generating good charts is hard. Doing it with the wrong tools is even harder. ( Actually, I already knew this, but got reminded of it in a big way.)

Oh, yeah. I made charts. Here and here:
http://i214.photobucket.com/albums/cc182/therealjeffa/tax-graphs-main_zps22c78aaf.png
http://i214.photobucket.com/albums/cc182/therealjeffa/tax-graphs-alt_zps65dbe75e.png

So what do these charts mean?

Probably very little. Let me explain.

For starters, why did I pick the years I did? Well, I picked 2012 because it’s current. I picked 1989 because so many recent tax arguments refer to the Reagan era. I picked 1945 because it’s one of those famous “taxes right after WWII went up to 90%” years.

Those are lousy reasons if you’re trying to come to a trustworthy conclusion about something. I could have picked three other sample years and created different implications about how things are, or how they’ve changed, or what taxes would look like if they were done “right”. Actually, the very fact that I only compare three sample years instead of five, or eight, or a long continuous series provides bias with another ton of leeway to creep in, whether I intend it or not.

Second, there’s too much information I don’t convey. The graphs cover only federal income and payroll taxes. They don’t cover sales taxes. They don’t cover taxes on capital gains. They don’t cover state & municipal taxes (and with good reason: that would add at least two orders of magnitude more work).

The graphs also assume you take the default standard deduction. No one who makes significant amounts of money does that. They itemize and get bigger exemptions. More importantly, what kinds of things could be written off has changed significantly over the decades. Unless you are a financial historian, I bet you have nowhere near an accurate idea how much taxable income a person from 1945 would have as a result of taking home a million dollar paycheck.

quarrel: Engraving of Thoth from the Luxor Temple. (thoth)

This study continues.

Courses & Topics:

  1. Get out of debt and stay out of debt. Children need to be taught how to manage their money and what they should expect to pay for various things like food, lodging, transportation, clothing, and supplies for work or home. They need to understand how debt reduces their mobility and makes it harder to build a reliable safety net so they can deal with unemployment, illness, family trauma, and other setbacks that life will throw at them. They need to understand what they'll earn for various kinds of work and how much of that money they'll get to spend vs. lose to taxes and social insurance payments.
  2. Learn how to fill out a fairly complex Form 1040. This teaches them a lot of practical math as well as giving them an understanding of how income is earned, how our society treats various forms of income (and why), and how much money we send to the federal government. This should be supplemented with a study of how much money local, state, and federal governments spend, and on what.
  3. How to write and read a great résumé. How to prepare for and conduct a job interview. How to present oneself effectively to others, and what to look for when observing another person. This gives not only a basic grounding in good communication (both written and verbal) but also some basic psychology.
  4. A class I'd call “Civics”: how to read a voter's pamphlet, research the candidates and issues on the ballot, and form an opinion on whom to vote for. Also cover the voter registration process and how and where to vote on election day. If possible, generate a good debate between people who support issues and candidates on multiple sides of a ballot.
  5. A class I'd call “Practical Science”. It would start with a series of exercises designed to teach the scientific method. It would then progress through an analysis, rooted in that method, of socially important topics like nuclear power/weapons, evolution and natural history, climate science, biology, ecology, and computing systems.
  6. A course on “The Body”, which would talk about diet and how to cook nutritious and healthy meals, how to exercise and set up a workout plan, and how to engage with the healthcare system — annual checkups, dental visits, eye care, dermatology, gynecology, and mental health.
  7. A course I'd call “The Mind”, which would focus on conflict resolution; lie detection; negotiation; identifying and stopping abuse, addiction, and dependency; coping with flight/fight responses; and teaching yourself self-control and delaying gratification.
  8. Finally, this would all be wrapped in some kind of cohesive structure designed to give these kids the most important skill they can learn before they become adults: flexibility. Kids need to learn how to change jobs, relocate, change political opinions, deal with windfalls and setbacks, and cope with changes in relationships, in their health, and in their country & government. For the next 50 years, these kids are going to be living in the most chaotic times the human race has seen since the fall of the Roman Empire. They need to get as much help as we can give them on how to live in such a world without going mad or giving up hope.

Required Reading:

  • The Declaration of Independence. The Constitution. The Bill of Rights. The Gettysburg Address. Eisenhower's Farewell Address. Kennedy's Inaugural Address.
  • Some parts of the Bible (Old & New Testament). Some parts of the Koran. Some meaningful Buddhist and Hindu texts.
  • A Tale of Two Cities. Snow Crash.
  • “The Atomic Bombings of Hiroshima And Nagasaki”.
  • The Singularity Is Near: When Humans Transcend Biology. Fire In the Valley: The Making of The Personal Computer.
  • Leaves of Grass. Hamlet.

There's nothing they shouldn't read.

Other Skills:

They should adopt a topic they are passionate about on Wikipedia and contribute to that topic in proper editor form.

They should pick a topic (other than entertainment) from current events and learn not just how to investigate that topic through news, blogs, and social media, but also to follow it over time, charting its changes and what it connects with and influences.

They should research investment strategies, devise one for investing $100 in the stock market, and do it. They should compare their results regularly with their peers.

They should learn how to play poker and craps, and understand the math that makes one a game of skill and one a game of chance.

They should learn to play a musical instrument.

They should learn how to take good photographs with their cell phone cameras.

They should learn how to assemble a computer from a box of components, install an operating system, patch it for security, install applications, and browse the internet with a client that did not come with the operating system.

They should learn how to change the oil in a car or truck and how to drive a manual transmission.

They should learn how to call 911 and what to be ready to communicate during that call.

They should learn CPR as well as how to treat a deep cut, a bad burn, an insect bite or sting, a broken bone, and a sudden gastrointestinal illness.

They should learn how to use a compass to navigate between fixed points, and how to return directly to their starting point without retracing their steps.

They should learn how to swim.

They should be exposed to routine government processes like crossing a border with a passport, going through airport security, being stopped by a police officer for a moving violation, and appearing in small claims court.

pop quiz!

Aug. 30th, 2012 09:02 pm
quarrel: Engraving of Thoth from the Luxor Temple. (thoth)

Easy Politico-Economic Questions

Your personal expenses are $100/day. You have an assistant who costs you $200/day. Rent and utilities are $1,000/month. (Assume all months are 30 days.) If your product takes a year and a half to develop, how much money do you deserve to make by selling it?

Hard Politico-Economic Questions

If you give free food to poor people, will the number of deaths from starvation go up or down?

Very Hard Politico-Economic Questions

What are your neighbors’ names?

playbor

May. 22nd, 2012 11:11 pm
quarrel: Engraving of Thoth from the Luxor Temple. (thoth)

“What’s that you’re reading?”

“It’s an article by a guy named Michael Thomsen about the growing trend of free-to-play video games. It takes an angle I haven’t seen before.”

“And that angle is…?”

“It’s short enough that it doesn’t need a summary, but the author’s main thread of reasoning goes like this:”

  • Capitalism, like gamification, causes people to do things for extrinsic reasons (namely, to make money) instead of intrinsic ones (namely, the acts are worth doing on their own merits). This causes all kinds of perversions and is, on the whole, more bad than good.
  • One of these perversions is that production and marketing schemes change constantly, since the goal is to dominate the market. This string of changes is endless and of decreasing morality.
  • When it comes to video games, free-to-play games are the latest and most immoral development in this string so far.
  • Lemma #1: Video games in general are already inherently flawed as a play activity. They are not pure games because they do not allow true play, which entails not just following a game’s rules but also experimenting with those rules in conjunction with the other players.
  • Corollary to Lemma #1: The inability of the player to supply or change the victory conditions, scoring methods, and performance rating systems within video games is an extension of this flaw.
  • Free-to-play games exacerbate this corollary shortcoming by aggressively promoting levels, leaderboards, and other game-supplied rating systems as surrogates for the performance metrics that the player isn’t allowed to supply himself.
  • Free-to-play games get exposed to millions of potential customers who are susceptible to psychological dishonesty and insufficiently strong at affirming their own self-worth to resist buying things that increase how successful the game says they are.

“I see what you mean about this being an unusual point of view. The author seems pretty sour on the whole ‘free market’ thing.”

“And how. Thomsen says capitalism is bad because it makes people do things for extrinsic rewards. Ideally, a person would do inherently good things for that very reason: they’re inherently good. The example he gives is producing food. Let’s say you’re a farmer.

“Option 1: you farm because you want to contribute to society, and societies need food. So you grow food and give it to society. Since your motivation is providing nutrition, you’ll try to grow nutritious food. You’ll be honest with people about your food’s benefits. You won’t interfere with other producers. If technology or trade obsolete your food source, great! The people still get the nutrition they need, which is the important thing; you’ll move on and find something else to do with your life.

“Option 2: you farm because you want personal wealth. So you grow food and sell it. Wealth is your goal, so you say your food is beneficial (even if it isn’t) so people buy more of it, and you say your food is better than everyone else’s (even if it isn’t) so people buy yours instead of theirs. If you’re growing corn, you say bad things about apples and rice, you vote to raise fishing license fees, and you lobby for laws that restrict chicken farms to domestic feed. You squelch research into alternatives to your food while funding experiments into additional, non-food uses for it—and if those uses prove more lucrative, you sell your food to them instead of to people who’ll eat it. You develop hybrids that are less nutritious but sturdier, so they can be shipped farther and sold to distant rich people instead of nearby poor people. You grow as much as you can convince people they want, even if you know they don’t really need it.

“Thomsen ranks the following four activities in order from most to least ethical, with the first clearly on the positive side and the rest being increasingly unethical practices that have arisen over time as consequences of capitalism’s corrupting influence:

  1. The communist/social contract model: producing inherently meritorious goods or services and contributing them to society free of charge.
  2. The traditional retail model: producing a good or service that you know people want, then selling it to them.
  3. The commercial TV/Facebook/Google model: producing a good or service that you know people want, then giving it to them for free while charging advertisers for exposure to your consumers and information about them.
  4. The ‘freemium’ game model: producing a good or service that people may or may not want, giving away most of it for free, jam-packing that part with psychological tricks like compulsion loops and artificial affirmations of worth, then charging the people who get brainwashed by this into wanting the rest of your product.

“What’s your take on it?”

“I don’t know. It smells like a just-so story. I’d be more convinced if Thomsen would make an actual prediction about what’ll happen next. Anyone can look at historic facts, come up with an explanation that accounts for all of them, and declare himself correct.

“And some parts don’t ring true. Thomsen claims that if you’re doing something for its own sake, you won’t change how you do it over time, but capitalism causes competition and drives endless change in a quest for total market share. I don’t believe that. I don’t see how a farmer would be uninterested in modern genetic modification, traditional genetic modification (a.k.a. ‘cross-breeding’), irrigation, crop rotation—hell, plowing—just because he’s farming out of a sense of duty to society. I’d expect improving crop yields to be at least as important to farmers who actually care about hunger than to those who only want to appear concerned as a PR measure. Alas, I am now literally arguing directly against Karl Marx. We both know how likely I am to win that fight.”

“What’s this journalist’s background?”

“He was born in Kenya to Dutch parents and grew up in Tanzania, Europe, and Fresno. He tried and failed, twice, to get into a music college, so he got an English degree instead. Then he spent three years in Hollywood as a producer’s assistant and screenwriter, followed by three years in the Peace Corps teaching English and health education. After that he did QA for Activision for two years, then did blogging and journalism since 2008.”

“So no economics experience?”

“No formal economics education beyond whatever prerequisites he might have needed for a BA in English. I don’t know about his experience. He’s certainly familiar with more socio-economic structures than I am, since he’s lived in more than I’ve even looked at.”

“And no journalism training?”

“Nothing on his résumé or in his bio.”

“So why do you care what he thinks? He supports his claims with nothing but the Argument From Authority fallacy, and apparently has little actual authority on top of that.”

“One: I don’t already know everything. That means I don’t have the time-saving luxury of knowing whether something is accurate and worthwhile before I read it. I have to take in everything and form an opinion afterwards.

“Two: Thomsen is interested in studying games and game design at an erudite level. That’s something I’d like to at least be able to keep up with, even though I’m unlikely ever to contribute something to the field myself due to lack of background and rigor.

“Three: It’s a thought-provoking piece regardless of whether I agree with him. When a legitimate game designer I respect comments that Thomsen shows he has no clue what’s really driving the free-to-play model, it points out that I’m not 100% able to launch into a convincing argument on the matter myself.

“Four: It’s a satisfying challenge to read something like this and figure out what the writer is actually saying through all the low-hanging hot buttons. It’s comforting to discover myself not getting hung up on tangents and straw men like so many of the article’s commenters.”

quarrel: (Default)

A University of Chicago alum talks about the lessons he learned playing Monopoly with less-restrictive house rules inspired by the free-market-loving, Nobel-winning economist Milton Friedman (coincidentally a professor there at the time, and who signed a copy of the game).
http://www.nytimes.com/2011/02/20/weekinreview/20monopoly.html

An episode of the Studio 360 radio show talks about the game’s recent official developments and invites listeners to submit their personal ideas for a updated version, with submissions to be judged by veteran game designer Brenda Brathwaite and the best entries publicized by the show.
http://www.studio360.org/2011/may/20/monopoly-redesigned/

A 2005 game blog rails against the fact that many Monopoly players either don’t know or don’t use the standard and interaction-increasing rule that if a property isn’t bought by the first player to land on it, it’s immediately auctioned to the highest bidder instead.
http://www.criticalmiss.com/issue10/CampaignRealMonopoly1.html

A game designer by the name of Jesse Fuchs goes into depth about Monopoly’s current reputation as a board game, its history, and how and why its rules came to be what they are today.
http://www.criticalmissforums.com/viewtopic.php?t=9&postdays=0&postorder=asc&start=30
http://vimeo.com/23271705
quarrel: (Default)

I stumbled onto the Jump$tart Coalition’s Student Financial Literacy Survey today. I tried to take it but could not find the questions in their raw form, so I had to imagine that the correct answers weren’t marked. Frustratingly, I had trouble understanding two of the answers. #4 didn’t make sense until I read the detailed coverage in the Survey Book. Then it was embarrassing how obvious it was. I suppose I missed some simple detail or overthought the problem. I also got 12 and 19 wrong. But at least I'm smarter than a 12th-grader.

quarrel: (Default)

I want a ham sandwich, but I'm only able to spend $3 on it. I walk down the street looking for someone willing to sell a sandwich to me for that price.

Jill sells ham sandwiches but wants $5.

Ben was selling them for $3 but is out now.

Sue sells watches.

Mitch is homeless and doesn't even have a store.

Which of these people — possibly more than one — is responsible for my inability to buy a ham sandwich?

quarrel: (Default)

Banks charge stores an average of 44¢ per credit card purchase to cover the costs of verifying the card and making the electronic transaction. The Senate just decided to let the Federal Reserve limit that charge to 12¢. I’m not sure what to think of this. My kneejerk reaction is that this move is unjustified unless there was some kind of price manipulation or oligarchy happening (and then would still be unjustified because other anti-shenanigans laws would presumably apply).

”How much is X worth?” is a very old and very hard question. Free Market fans will be quick to point out that if stores are willing to pay banks 44¢ per use for this service, then it’s worth that much by definition, though it’s always possible that stores came to that determination using poor logic or bad data, or falsified data feed them by those same banks. I haven’t seen any allegations that this is what happened, though. The support I have seen for this law goes something like this:

  • This change will lower purchase prices for all consumers since stores will have lower costs to pass on.
  • This change will shift the cost of the privilege and ease of using credit cards more heavily onto only those customers who actually use them. Right now, stores spread the cost of transaction fees over all customers. In the past, stores tried to add a credit surcharge only to credit purchases. This was reviled by shoppers, even when it was touted as a price break for using cash instead of a fee for using plastic. Under this new plan, banks that want to recoup lost revenue can’t get any more from stores and must look elsewhere, such as higher annual cardowner fees.
  • This change will drop annual bank revenue by about $11.6 billion and recover some of the TARP bailout funds that should never have been given to banks in the first place, since they caused the meltdown. In this instance, it’s actually irrelevant whether the 44¢ cost is justified in and of itself.
  • This change will encourage banks to stop delaying and finally do what Europe has already done: switch over to encrypted chipped cards (*), which are more secure and cheaper to operate.
  • This change will address the issue that banks make too much money.

What’s actually going to happen? I don’t know. The last accurate political prediction I made was that China would address the Tiananmen Square protest with military force. I almost predicted that insurance companies would cancel some programs as a result of Obamacare, but it was more a realization that might happen than a firm expectation.

* EDIT: correction

quarrel: (Default)

There once was an MMORPG. It had guilds, and it had trading, but it had no default in-game currency. One perennial guild that cropped up in it year after year was called The Goods. Its purpose was “to assist citizen retention...by facilitating trade”. It kept a central stockpile of all raw and simple manufactured goods in the game, it maintained its own abstract out-of-game currency records, and it published transparent formulas for adjusting prices based on supply and demand.

One simple manufactured good was pinch rollers. Pinch rollers were a low demand item. One or two were needed to upgrade some manufacturing equipment, which only needed to be done a handful of times, ever, for an entire player community, and four were needed to pay tuition by any player who wanted to raise his Mining skill to level 3 (which was most players who ever wanted to mine ore, which I estimate was at least half the playerbase). The iron they were made from was in high demand due to the sheer number of other things made from it, and the amounts of those things that were needed, and the fact that many were consumable and needed constant replacing.

There was also a player. I’ll call him R. R did many things that annoyed many people. He acted, in fact, like someone off his meds, which he himself blamed his behavior on at least once. Up to that point in the game’s history, he was the only player other than deliberate griefers that the general community discussed banning. (The administrators never banned players for their actions toward other players, no matter how malicious. They gave this power, by design, to the players, leaving themselves to handle only offenses like hacking or crashing the server.)

R had a theory. R believed The Goods were fixing prices and running the game in a blatantly obvious conspiracy. Their formulas were a smokescreen. The players who got the best deals were always, always, always friends with Goods members. And the icing on the cake: according to those allegedly totally fair and objective pricing formulas, pinch rollers were worth less than the iron they were made of. Less! No rational, honest, natural market could possibly value a finished good at less than its cost of materials. Ever! This was bona fide proof that their prices were artificial.

No one believed him, of course. He was a kook.

quarrel: Engraving of Thoth from the Luxor Temple. (politics)

Some months ago I surveyed several friends on basic politics and political education:

Here is a hypothetical scenario for your consideration. Imagine, say, that you have a neice going to college next year, or you get recruited into the local high school's PTA, or some other situation arises where you find yourself with the power to determine how a class of young U.S. high school or undergraduate citizens is educated about politics, economics, and civic responsibility. What essentials, what fundamentals, do you feel would be a bare minimum for such a course so its students got a firm foundation and a reliable head start toward competence and self-sufficiency?

What topics would you make sure the class covered? What terms would you make sure were included? What concepts?

What material would you have them read? What books? What famous documents? Is there any material you'd caution against?

What people would you have them study?

What would you teach about the structure of government? How much would you stress federal vs. state vs. county vs. city?

How would you encourage the kids to stay abreast of current events? What sources of information would you recommend for common news coverage? What resources would you suggest for followup investigation?

How would you encourage the students to use what they learned?

What would you do that I haven't covered here?

About half the people I surveyed answered. Here's roughly what they said.


Person #1

Recommend everyone read some Noam Chomsky and watch the "Speaking Freely" series on Netflix. Also good are The Problem with the Media by Robert McChesney and the BBC series "The Power of Nightmares". Unfortunately, this amount of left-biased material cannot get past any school board without counterbalancing conservative material. Rush Limbaugh, Glenn Beck, and Ann Coulter are all unacceptable choices for this since too much of what they say is fabricated. More serious convervative or neoconservative philosophers, like Leo Strauss, might work.


Person #2

Terms & Concepts

  • The difference behind the philosophies of being conservative (self reliant) and Liberal (having the state solve people's problems)
  • The difference between Miltonian and Keynesian economics, and how that builds the different approaches our elected officials take.
  • Recognizing media bias. Conservatives in the country outnumber liberals 2 to 1, yet liberal journalists outnumber conservative journalists 4 to 1. This affects how we get our news. Logical fallacies are handy here too, but that's an entire course in itself.
  • Which Republicans are actually progressives. Too many kids get caught up in the team sport aspect of politics and don't get that Bush was a liberal and that true conservatism in a president is pretty rare.

Books

  • Freakonomics
  • The 5,000 Year Leap
  • Liberal Fascism: The Secret History of the American Left, From Mussolini to the Politics of Meaning
  • Positioning: The Battle for Your Mind (a marketing book)
  • Manufacturing Consent

News

  • www.drudgereport.com
  • hotair.com

Person #3

General Goals

  • Understand the relationship of axioms, observations, goals, logic, and conclusions
  • Exposure to the practical consequences of historically significant political and economic philosophies.
  • Immunization against propaganda.
  • Understand that "right" and "wrong" are relevant to philosophy and economics.
  • Understand that correctness is evaluated by real-world results.

Books

The Law by Frédéric Bastiat and Economics in One Lesson by Henry Hazlitt cover the fully rational side of things. But humans aren't rational, so temper with something like P. J. O'Rourke essays from Parliament of Whores and Eat the Rich. Counterpointing abstract and concrete approaches like this also helps instill healthy skepticism of philosophers, economists, and politicians.

Key Concepts

  • What are the facts?
  • How do you know?
  • What non-factual arguments are being offered?
  • Who benefits from each possible course of action?
  • How can each course of action be exploited or worked around later?
  • What are the side effects?
  • Is there a simpler way to achieve the same result?
  • If you're trying to encourage an action, is the action good in itself or merely associated with people you like?
  • If you're trying to prevent an action, is the action bad in itself or merely associated with people you don't like?
  • Would you really force someone, at gunpoint, to do what you want in this situation?

News

Anything. Stay current from several sources. Avail yourself of everything at first, regardless of its reputation. Form your own opinion regarding what to trust.


Person #4

Terms & Concepts

  • Government (literally guberno (to steer/control) + mens (the mind)
  • Law
  • Property
  • Sovereignty as the base of authority behind all laws, sovereign people vs. sovereign ruler
  • Natural rights theory vs Social Contract rights theory, i.e. rights granted by an authority vs having all rights so long as they do not interfere with others.
  • Fiat currency (debt) vs hard currency (based on commodities or other hard limits).
  • Free market economies vs. central planning.
  • Principles, and why they matter more than short-term gain.

Books & Other Media

  • The US Constitution and the arguments that lead to it, including all Federalist Papers.
  • On the Horns of the Beast: The Federal Reserve and the New World Order by Bill Still
  • Free to Choose: A Personal Statement by Milton & Rose D. Friedman
  • Liberty Defined: 50 Essential Issues That Affect Our Freedom by Ron Paul
  • The Century of the Self, directed & produced by Adam Curtis
  • The Road to Serfdom by Friedrich Hayek

News

Every single bit of information one can digest. Be your own editor so you serve your own agenda, not someone else's.

quarrel: (Default)

It seems I'm not the only one who wants to break barriers to entry into difficult topics. There is an economics festival in Kilkenny, Ireland. The festival brings several economists and comedians together for a long weekend of lectures and Q&A sessions designed to make the topic approachable to laypeople.

Sadly, I can't verify whether their information is accurate and thorough, but if they've got their fact straight, and if mass-education effects like summits and wikis do more good than harm in general, I like that someone out there is trying something.

quarrel: (Default)
http://en.wikisource.org/wiki/Modern_Money_Mechanics/Introduction

http://en.wikipedia.org/wiki/Talk:Fractional-reserve_banking

http://books.google.com/books?id=krc-Tf9JfY0C&pg=PA134&dq=economics+fractional+reserve+banking&sig=sg6LSwy7a43Lufkzm_j11wWfiaw#v=onepage&q=economics%20fractional%20reserve%20banking&f=false

http://www.yesmagazine.org/issues/the-new-economy/how-banks-make-money

http://www.chrismartenson.com/crashcourse/chapter-7-money-creation

http://ezinearticles.com/?How-Banks-Create-Money-Out-Of-Thin-Air&id=921796

http://ingrimayne.com/econ/Banking/Commodity.html

Those are more or less the first half-dozen websites I found through Google searching on the question of whether the way banks lend money in the U.S. — that is, more than they actually have in the vault, up to a limit — somehow creates more money. They all say "yes", save for a couple isolated comments from random visitors.

Then I went to http://en.wikipedia.org/wiki/Money_supply on the advice of a knowledgeable friend and found something those sites didn't mention: there is more than one definition of "money". After that, I found the best explanation so far at http://www.khanacademy.org/?video=banking-1#Banking%20and%20Money , but I doubt I'd have kept looking if I didn't have an expert steer me in the right direction after I incorrectly concluded I'd found the correct answer.

I don't know if the authors of all the sites I found on my own were wrong, lying, mislead, or oversimplifying on purpose. I knew that economics, like all sciences, has its own vocabulary. Words like "demand" and "shortage" don't mean what they do in everyday English. I hadn't realized "money" was in the same category.

Is this a curse or a blessing? How many tens of thousands of dedicated, responsible citizens are doing their civic duty by voting and whatnot with no idea that they're doomed to random flailing since they can't trust what grade school-level words mean? Isn't that bad?

Or is it good that there's such a clever filter ingrained in the system to weed out the ignorant and the poseurs so the people who actually understand what's going on can interact with one another without intrusion? Barriers to entry can be good things. Maybe it's better for the country as a whole that there's the distraction of feels-good-but-ultimately-ineffective activism to occupy the don't-quite-get-it-yet crowd so they don't obstruct the people who understand the system.
quarrel: (Default)
1. Equilibrium price is the price that gets items to sell exactly as fast as new ones are made. Since the most you can make is 10 sandwiches, find the price that makes 10 people per day want to buy a sandwich. That's $4.

2. Market value is the current competitive price on the open market. I haven't told you anything about the whole market in this example, so you can't answer this question.

3. You lose money at $0 and $1 since you can't recover costs, so you can reject those possibilities out of hand. Likewise, you lose money at $7 since you don't sell anything. If you run the remaining numbers, you should see that $5 is the best price. It nets you a total gain of $27. (Remember to make only eight sandwiches or you'll waste $2 making sandwiches that won't sell.)

4. This is the tricky one. First of all, it isn't an economics question. It's...I don't know. A political question? A moral question? Whatever the case, you can't answer it with economics, and you can't answer it at all until you decide what you mean by "ethical". Once you figure that out, there are several approaches you could take.

If you're trying to make the most money, sell for $5.

If you think it's wrong to charge more than a certain markup over how much your ingredients cost, sell for only $2 or $3.

If you're primarily trying to distribute sandwiches to as many people as possible and maximizing your profit is a secondary concern, sell for $4.

If you want to get sandwiches to as many people as possible at the lowest possible cost that doesn't run you out of business, sell for $2.

If you want to run a total charity, sell for $0.

One thing to keep in mind: in all these cases except the first, only ten people get sandwiches every day. You don't actually feed more people by selling your food for super-cheap.
quarrel: (Default)
Let's say you run a sandwich shop. It costs you $1 in ingredients to make a sandwich, plus a flat $5 per day for rent and the lights. You're working alone and they're really fancy sandwiches, so you can only make 10 per day.

The number of sandwiches you can sell in a day depends on what you charge for them:

$0350
$140
$225
$316
$410
$58
$65
$70


Questions! Any prices will be in whole dollars.

1. What is the equilibrium price for your sandwiches?

2. What is their market value?

3. What's the most profitable price you can ask?

4. What's the most ethical price you can ask?

Simple answers tomorrow!
quarrel: (Default)
I saw this link posted by a random friend. It's in the Opinion section of the Wall Street Journal:

Are You Smarter Than a Fifth Grader? Self-identified liberals and Democrats do badly on questions of basic economics.

I wondered what those questions might be and how I'd fare, so I read it.

The heart of the article was a survey of about five thousand Americans. The WSJ op-ed piece focused on the apparent divergence in answers between the participants who self-identified as progressive/liberal and those who said they were conservative or libertarian. The survey itself — you can get the PDF through here — was more concerned with correlating economic understanding with education level.

It's about then that I realized I had no idea what I was doing. I couldn't shake the feeling that there was something blindingly obvious that anyone with any training could identify with little to no effort that would reveal the conclusion or the survey itself to be invalid, but damn if I could stand in front of the class and point to it on a map. First, there was the company that ran the survey originally, in 2008. Then there were the authors of the May 2010 analysis paper. And the university they were affiliated with. And the author of the WSJ article (which was one of the two paper authors). And how the sample was selected, and how the results were interpreted, and whether the questions were valid. Any one of these might be discredited or unscientific or unqualified or biased. Any one might have a documented track record of errors or partisanship. Unfortunately, to me, every university and Ph.D. looks like any other, and criticism of political institutions by other political institutions is a given, so I couldn't trust any I found.

So I tweeted those links to see what some other, smarter friends thought and got a helpful earful from multiple sources that the very concept of a "basic" economics question, that can have a "correct" answer, is oversimplistic fantasy. Apparently I'd overshot from the beginning. The core problem (if these folks are right!) was that the survey wasn't really asking, "Can you answer these elementary questions correctly?" It was asking, "Can you answer these elementary questions correctly from the standpoint of one particular school of thought on how the world works?" with the inherent assumption that that school was correct. (That school, as you might expect, is one that conservatives tend to agree with and that liberals do not.) And the fight between them has been going on for decades, with economists from both sides winning Nobel prizes.

The number of textbooks I have to read now just tripled, I think. I really, really hate not just knowing this stuff off the top of my head like everyone else.
quarrel: Engraving of Thoth from the Luxor Temple. (knowledge)
This is a rewrite from scratch of something I posted a year or two ago to the City of Heroes forums. It was a sort of affirmation of the basic free-market principles I myself was rediscovering from following the threads there, particularly threads regarding flipping, or buying items that had been listed on the global market at less than their going value and immediately relisting them at a higher price oneself.

The Customer was hungry. It was lunchtime, and time for his sandwich. The Customer liked sandwiches, which was good, since he worked on a street full of sandwich shops. These shops ran up one side and down the other, all right there on the Customer's block, all within easy walking distance. And they all sold all their sandwiches for four dollars, each and every day.

So the Customer was surprised to see a six-dollar price tag one day, not just on one sandwich but on every sandwich on every shelf in one particular shop. The Customer called the Shopkeeper over. "Is this a mistake?" he asked. "Why do these cost more?"

"Oh, it's no mistake. I charge more because of the special service I provide," replied the Shopkeeper.

Now the Customer was polite, and since he didn't wish to wear out his welcome, he bid the Shopkeeper good afternoon, walked to the shop next door, and bought a four-dollar sandwich.

But the Customer was also curious. "Special service?" he wondered as he ate his sandwich on the walk back to his office. What special service? That shop was no closer than any of the others, or at least not closer by enough to matter. Neither was it any larger, nor any cleaner, or any more attractive or brightly lit. Their sandwiches were all the same size, on the same style bread, with the same meats and cheeses and slathered with the same brands and amounts of condiments. The Customer dug further into its business practices yet still could not discern what set that one store apart. All the shops paid the same rent. They all used the same amounts of electricity and water and gas, supplied by all the same utility companies. They all had the same number of employees and paid them the same wages.

Defeated, the Customer returned to that one store the next day. "Excuse me," he said to the Shopkeeper, "but what you said yesterday confuses me still. I've looked at your sandwiches, and I've looked at your shop, and I've looked at your business. I simply do not see what sets yours apart. If you don't mind my asking, exactly what is this special service of yours?"

The Shopkeeper leaned back and smiled. "Ah. That. It's actually quite simple. The special service I provide is that my store still has sandwiches for sale when everyone else is out."