Monday , June 21 2021
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Managerial Econ

Managerial Econ is hosted by a group of economists who have written a managerial economics book together called Managerial Economics. This blog add an economic analysis to quirky topical news like why uber drivers are more efficient than taxi drivers.

G-7 countries collude to eliminate competition among themselves

 Countries compete for residents by offering to do more for less (lower taxes), in the hopes of attracting people and firms, e.g., Ireland’s low [12.5% corporate tax] rate has helped attract many of the new breed of footloose digital giants that don’t need to be close to consumers to sell to them, and can register their intellectual property—from which their profits derive—just about anywhere. Like any cartel, the G-7 can make itself better off by fixing prices (corporate tax rates at...

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Should Dropbox make or buy cloud services?

 By in-sourcing IT services, Dropbox saved $115 M over two years, doubling its gross profit margin.  Actual spend as a percentage of COR is typically even higher than committed spend: A billion dollar private software company told us that their public cloud spend amounted to 81% of COR, and that “cloud spend ranging from 75 to 80% of cost of revenue was common among software companies”. 

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Inflation and the weak dollar

 Good post about inflation, here is one part related to chapter 116) The USD is at a 3-year low. The way I look at it — and this is a vast oversimplification — is that a weak USD buys less in foreign goods, which increases the price of imports, contributing to inflationary pressures.In other words, the falling dollar increases demand for domestic good because it raises the price of substitute imported goods.  HT:   MarginalRevolution.com 

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How do you align the incentives of sea captains transporting criminals to Australia with those of British public (1800’s)?

[embedded content] By paying them for the number who arrive alive--instead for number who board the ship--death rates dropped from 30% to 1%.This anecdote is taken from the introductory lecture from our friends at George Mason University, who had put their Microeconomics class online:Introduction to MicroeconomicsINSTRUCTOR: Tyler Cowen, George Mason University

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Why Finding a Rideshare is So Difficult in Boston

Because the state restricted surge pricing. Boston Magazine has a nice article explaining the market for ride-sharing. A relatively new state law that forbids “surge pricing” during declared emergencies. Surge pricing is a higher than normal price when demand temporarily increases more than supply. The higher price, and higher payment to drivers, was meant to encourage more drivers to participate. Since the pandemic has been declared a state of emergency, surge pricing has been banned for...

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Do criminals respond to incentives? (II)

 In San Francisco they do.  In 2014, the city reclassified nonviolent thefts as misdemeanors if the stolen goods are worth less than $950.  With a lower expected penalty for stealing goods, and big expected benefits, like open air markets that allow thieves to fence stolen goods, crime has surged.As I was paying for [a purchase], a man walked into the store, grabbed a handful of beef jerky and walked out. I looked over at an employee, who shrugged. Then I went to Safeway next door for some...

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On the post-pandemic future of cities

Bloomberg has an optimistic vision of the post-pandemic central business district (CBD), as more work from home, and density has come to be associated with disease:... The CBD can no longer function as a collection of low-end grab-and-go cafeterias, chain coffee shops, restaurants and salad bars. To evolve and survive, its offerings will have to become more local, authentic and actively curated. A day at the office will be spent less in a single building and become more like a localized...

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Agile Software Development

Traditional software development ("waterfall"), is plagued by predictable problems:  developers plan the next software release, then design, built, test, and release it, completing one phase before the next starts.  The entire process might take a year or longer, and by the time it is done, the product is not very good for one of two reasons:  either the technology has advanced, so that the software is obsolete before it is released, or the client's demands have changed, and they no longer...

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Do criminals respond to incentives?

At least in Minneapolis they do.I am old enough to remember the debate (late 1980's at the Sentencing Commission) about whether punishment deters crime.  Some criminologists mocked the economic model of crime which assumes that criminals respond optimally, rationally and self-interestedly to the incentives created by expected punishment (the probability of being caught and convicted times the punishment if convicted).  The policy implication was clear:  increase the expected penalty to...

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