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Home / Tag Archives: 03. Benefits; costs and decisions

Tag Archives: 03. Benefits; costs and decisions

Bias in damages and systemic racism

There are many reasons for significant racial disparities in policing outcomes, but one stems from a simple but macabre cost-benefit calculation. In the United States, tort damages (such as those awarded for unjustified injury or death of a suspect) are based on actuarial tables that vary by race. As Helen White writes in the Yale Law Journal: The tables show the average member of a group defined not only by such metrics as age and income but also by race. Problematically, this results in...

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Allowance teaches kids about opportunity cost

[This essay was written more than a decade ago by the late Steve Dalton to teach kids the purpose of an allowance.  Its lesson could have come straight out of Chapter 3 "We cannot always build the future for our youth, but we can build our youth for the future." Franklin Delano Roosevelt Why give an allowance? For one big reason: To help your youngsters learn how to manage money. An allowance is not to relieve you of paying for some of your children's wants or needs. It is the best...

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Run experiments to measure the effects of advertising (and make money)

Readers of this blog know that we are big fans of randomized control trials (RCT's).  Here is a story from a new book, The Power of Experiments, taken from a review by Strategy & Business. eBay used to pay Google about $50 million annually for ads by search terms that included the company name, such as eBay or eBay shoes. To determine whether this was worth the money, they ran an experiment, turning Google ads on and off, and tracking the traffic coming to eBay from Google ads (paid)...

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Bad ideas from Nashville politicians

Potential exam question:QUESTION:  Nashville currently has had a ban on evictions for about two months.   In about two weeks this ban will expire. Question:  What would happen if we followed Councilman Sean Parker's call for banning "Evictions ... until Davidson County's unemployment rate returns to 2.8%..." ANSWER: In the short run, it would reduce incentives for renters to pay rent in a timely manner.  This would reduce the value of owning and building housing, which would reduce the...

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Lockdowns vesus contact tracing

Mulligan, Murphy, and Topel* have a thoughtful policy piece on "Some basic economics of COVID-19 policy." It combines a number of economic concepts (e.g., fixed costs versus marginal costs, option value, externalities, capital depreciation (physical and human)). Essentially, it compares the relative strengths of the policy alternatives of Large-Scale Social Distancing (LSSD) versus Screen, Test, Trace and Quarantine (STTQ). From their summary: Our analysis indicates that the features of a...

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Subsidies to “Flatten the Curve”

Summary: Trying to quarantine everyone until a vaccine is available doesn’t seem feasible. In addition, restrictions mainly delay when the epidemic explodes, e.g., see previous post on Flattening the Curve.   In this paper, we propose subsidies to both individuals and businesses, to better align private incentives with social goals, while leaving it up to individuals and businesses to decide for themselves which risks to take.For example, testing would give individuals the information...

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What does “flattening the curve” mean?

Policy makers are using the term to describe the effects of social distancing and travel restrictions.  In this post, we use a cellular automata model of infection to show how they might do this.DISCLAIMER:  THIS IS AN UNREALISTIC MODEL, FOR TEACHING PURPOSES ONLY.The images below are from a cellular automata model of the spread of a disease on a 100x100 grid.  White dots represent uninfected; red dots, infected; green dots, survivors; black dots, deaths.  The key parameters are:death...

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A simple way to combat corruption

New paper:  Does Greater Regulatory Burden Lead to More Corruption?The paper documents that regulation seems to create opportunities for public officials to extract bribes.  It finds that the bribery rate is higher the higher the cost of regulation. Briber is measured as a percentage of firm sales,  so a 1% increase in regulation will cost a firm with revenue of $1M about $3,000 in bribes to avoid. SOLUTION: ."..deregulation offers a simple way to combat corruption."HT:...

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“There might be some unintended consequences,” she added.

WSJ: If two-thirds of voters approve the measure, San Francisco would become one of the first big U.S. cities to tax landlords for store vacancies when it goes into effect next year. Washington, D.C., imposed a similar tax in 2011, though it was on residential and commercial property vacancies, not just retail. Predict the unintended consequences in the comments. HT: Cramer

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Hidden Costs on Social Media Marketing

Michael Farmer cautions advertisers to be aware of the hidden costs of exploiting online and social media. Advertisers in traditional media, such as print, radio or TV, were familiar with what a campaign entailed. But the online scopes of work expanded into "banner ads, email marketing, Facebook posts, Instagram posts, mobile marketing efforts, and website development." The big advantage of online campaigns is the near instantaneous and increasingly granular feedback that can inform the...

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