Sunday , April 11 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.

President Joe Biden vs. Joe Biden

 NY Times has a good article on the Biden administration's contempt for economics.   “The next generation of the economics profession is rebelling against its predecessors by being all about inequality in the same way that my generation rebelled against its predecessors by being all about incentives, and this is a good thing,” said Larry Summers, who served as Treasury secretary under Bill Clinton and N.E.C. director under Barack Obama.  Biden has less trust in economists, and so does...

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Gig Workers of the World Unite!

Door Dash drivers are trying to beat the algorithm. When a specific meal needs to be delivered, Door Dash's algorithm will post the gig to available drivers with payment information. If no one accepts, the algorithm raises the compensation level. This is how markets are supposed to clear. What if drivers organize to withhold their services until the rate rises enough? In labor markets, this is the main goal of employee unionization. In business markets, we call it collusion. (It is an open...

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Restrictive zoning causes segregatation in Connecticut

Restrictive zoning--90% of Conneticut allows only (expensive) single-family homes--limits supply, especially of lower priced housing like apartments, and drives up the price.  From Vox:According to one measure by researchers at the University of Pennsylvania’s Wharton School, Connecticut has the 15th-most regulated residential building environment. In doing so, it has confined poorer people to small parts of the state and likely discouraged countless more from ever moving to the state.The...

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The Economics of Vending Machines

Zachary Crockett at the Hustle has a nice description of the economics of owning and operating vending machines. It is a fascinating look at an industry I would never have known about otherwise. There are about 2 million in operation in the US generating $7.4 billion in annual revenue for nearly 18,000 businesses that own them. Most owners run small operations as sole proprietors but Coke and Pepsi have vertically integrated into owning their own machines. The business scales well which...

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Is the recent 10% house price increase going to stick?

Last year, house prices in my zip code increased by about 10%; and they are forecast to increase another 10% this year.  This "tightness" or "seller's market" is indicated by the small available supply relative to demand, as indicated by the 2.1 months of inventory.  [NOTE:  months of inventory=(# houses for sale)/(selling rate per month)].  In the scatter plot below, we see that an inventory of 2.1 months (vertical axis) is normally associated with about a 1.5% monthly price increase...

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Which cities have the cheapest house prices?

From chapter 9, we know that in the long run a mobile asset has to be indifferent to where it is used, otherwise it will move.  This long-run indifference principle means that in the long run, you should be indifferent about where to live and whether to own or rent.  In particular, the price-to-rent ratios should reflect this "indifference," and be  similar across cities.  However, this is is certainly not the case.  Here are the most expensive cities:CityPrice-to-RentRatioHome Price(for a...

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Housing Bubble-ology: is this time different?

 The WSJ is apparently reading our blog: (earlier blog post)The Pandemic Ignited a Housing Boom—but It’s Different From the Last OneResidential home sales are hitting peaks last seen in 2006, just before the bubble burst, but this time mortgages are stricter, down payments are higher, and a tight supply is supporting prices

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South Lake Tahoe: when housing inventory is low, price increases

More evidence of adjustment in the housing market to changes in demand and supply.  The Pandemic has increased demand for housing, taking the available supply of houses to buy (blue line) to historic lows.  Price increases (red line) generally follow.  The seasonal spikes are due to increases in seasonal demand for vacation houses (higher in summer).  South Lake Tahoe has a large percentage of second (vacation) homes. CalculatedRisk is a good blog to follow if you are interested in real...

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Mask moral hazard?

According to an AP article, "Virus Tolls [are] Similar Despite Governors' Contrasting Actions." The article suggests moral hazard is the cause: Some people voluntarily were “being more vigilant in states where the guidelines are more relaxed,” said Thomas Tsai, an assistant professor at the Harvard T.H. Chan School of Public Health.In other words, in states where it is safer, people take more risks.   

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Housing Bubble-ology: is this time different?

Famed Bubble-ologist Robert Shiller called "bubble" on the housing market in 2006 based, in part, on graphs like the one above, showing the relative prices of owning relative to renting.  We know from Chapter 9 that, in long-run equilibrium, a mobile asset has to be indifferent as to where it is used, otherwise it will move.  Here, think of the mobile asset as either people, who can rent or own, or houses and apartments that can be rented or sold.  In the graph above, the current housing...

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