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kottke.org posts about economics

Restaurant ticketing systems are a hot ticket

posted by Jason Kottke   Jun 09, 2014

Alinea stats

For three years, Nick Kokonas’s trio of eating/drinking establishments in Chicago (Next, Alinea, and Aviary) has been using a ticketed reservation system. In this epic piece, Kokonas details why they started using tickets and what the effect has been (emphasis mine):

Our ticket implementation strategy at Alinea was to create a “higher-touch” system than we had previously used at Next. Every customer buying a ticket at Alinea must include a cell phone number where we can reach them. About a week before they dine with us we call every customer to thank them for buying a ticket to Alinea, ask if they have any dietary restrictions or special needs, and generally get a feel for their expectations and whether it is a special occasion. We can, in fact, spend more time (not less) with every single one of our customers because we are only speaking with the customers we know are coming to dine with us. Previously, we answered thousands of calls from people we had to say ‘no’ to. Now we can take far more time to say ‘yes’.

The results on Alinea’s business are staggering. Bottom line EBITDA profits are up 38% from previous average years. No shows of full tables are almost non-existent and while partial no-shows still occur they are only a handful of people per week at most. That allows us to run at a far greater capacity with less food waste and more revenue.

Will be interesting to see if more restaurants adopt this model…I bet a bunch of restaurateurs’ eyes lit up at the 38% increase in profit. But not every restaurant is Alinea and not every restaurateur is a clever former derivatives trader.

Reimagining Monopoly

posted by Jason Kottke   May 14, 2014

Mike Merrill reimagines the game of Monopoly to better represent the modern financial system by adding the banker as a player, convertible notes, and Series A financing.

Each player starts with only $500. That’s a nice bit of cash, but it’s going to be expensive to build your capitalist empire. Baltic Avenue will cost you $80, States Avenue is $140, Atlantic is $260, and that leaves you just $20. Even if you’re the first to land on Boardwalk you won’t be able to afford the $400 price tag. Another $200 from “passing Go” is not going to last that long. You need more money.

At the start of the game the banker will offer each player a convertible note of $1000 at a 20% discount and 5% interest*. Armed with $1500 the player is now ready to set out on their titan of the universe adventure! (Of course players are not required to take the convertible note.)

That sounds fun? (via waxy)

Think Like a Freak

posted by Jason Kottke   May 09, 2014

Steven Levitt and Stephen Dubner, the co-authors of the immensely popular Freakonomics, are back with their third book in the series: Think Like a Freak. In it, rather than discussing what they think, they talk about how they think.

Levitt and Dubner offer a blueprint for an entirely new way to solve problems, whether your interest lies in minor lifehacks or major global reforms. As always, no topic is off-limits. They range from business to philanthropy to sports to politics, all with the goal of retraining your brain. Along the way, you’ll learn the secrets of a Japanese hot-dog-eating champion, the reason an Australian doctor swallowed a batch of dangerous bacteria, and why Nigerian e-mail scammers make a point of saying they’re from Nigeria.

The book is out on May 12, but of course you can preorder, etc.

Update: Excerpt in the WSJ.

The economics of The Simpsons

posted by Jason Kottke   May 02, 2014

Homer Economicus is a new book which uses the fictional world of Springfield on The Simpsons to explain the basic concepts of economics.

Since The Simpsons centers on the daily lives of the Simpson family and its colorful neighbors, three opening chapters focus on individual behavior and decision-making, introducing readers to the economic way of thinking about the world. Part II guides readers through six chapters on money, markets, and government. A third and final section discusses timely topics in applied microeconomics, including immigration, gambling, and health care as seen in The Simpsons. Reinforcing the nuts and bolts laid out in any principles text in an entertaining and culturally relevant way, this book is an excellent teaching resource that will also be at home on the bookshelf of an avid reader of pop economics.

(via mr)

Uneasy lies the head that wears a crown

posted by Jason Kottke   Apr 30, 2014

I really liked this bit from Rolling Stone’s interview with Game of Thrones writer George R.R. Martin:

Ruling is hard. This was maybe my answer to Tolkien, whom, as much as I admire him, I do quibble with. Lord of the Rings had a very medieval philosophy: that if the king was a good man, the land would prosper. We look at real history and it’s not that simple. Tolkien can say that Aragorn became king and reigned for a hundred years, and he was wise and good. But Tolkien doesn’t ask the question: What was Aragorn’s tax policy? Did he maintain a standing army? What did he do in times of flood and famine? And what about all these orcs? By the end of the war, Sauron is gone but all of the orcs aren’t gone — they’re in the mountains. Did Aragorn pursue a policy of systematic genocide and kill them? Even the little baby orcs, in their little orc cradles?

(via mr)

Reading Capital in the Twenty-First Century

posted by Jason Kottke   Apr 29, 2014

Last week, I noted on Twitter that a 700-page academic book by a French economist topped the best sellers list on Amazon. Well, Thomas Piketty’s Capital in the Twenty-First Century is still #1 on Amazon, even though the hardcover is currently out of stock. If you’re curious about this anti-Kardashian moment in our culture but don’t want to dive in fully, you can read the book’s introduction on Harvard University Press’s site.

The distribution of wealth is one of today’s most widely discussed and controversial issues. But what do we really know about its evolution over the long term? Do the dynamics of private capital accumulation inevitably lead to the concentration of wealth in ever fewer hands, as Karl Marx believed in the nineteenth century? Or do the balancing forces of growth, competition, and technological progress lead in later stages of development to reduced inequality and greater harmony among the classes, as Simon Kuznets thought in the twentieth century? What do we really know about how wealth and income have evolved since the eighteenth century, and what lessons can we derive from that knowledge for the century now under way?

Or you can try Vox’s short guide to Capital or HBR’s Capital in a Lot Less than 696 Pages.

It is massive (696 pages) and massively ambitious (the title is a very conscious echo of Karl Marx’s Das Kapital). It came out in France last year to great acclaim, which meant that those in the English-speaking world who pay attention to such matters knew that something big was coming. Over the past few weeks it has become one of those things that everybody’s talking about just because everybody’s talking about it. That, and it really is important.

Is it worth reading? Martin Wolf of the Financial Times called it “enthralling”; a couple people I know have described it as “a slog.” I’d liken it to a big river — muddy and occasionally meandering, but with a powerful current that keeps pulling you along, plus lots of interesting sights along the way. There are endless numbers and (ugly but generally understandable) charts, but also frequent references to the novels of Balzac and Austen, and even a brief analysis of Disney’s The Aristocats. Regular people can read this thing; it’s just a matter of the time commitment. You should definitely buy it, if your place on the income distribution allows it. It looks good on a bookshelf, plus every copy sold makes Piketty wealthier, allowing us to discover whether this alters his views about inequality.

Always buy the bigger pizza

posted by Jason Kottke   Feb 26, 2014

Planet Money: always buy the bigger pizza because geometry.

The math of why bigger pizzas are such a good deal is simple. A pizza is a circle, and the area of a circle increases with the square of the radius.

So, for example, a 16-inch pizza is actually four times as big as an 8-inch pizza.

And when you look at thousands of pizza prices from around the U.S., you see that you almost always get a much, much better deal when you buy a bigger pizza.

Is Bitcoin a speculative bubble?

posted by Jason Kottke   Dec 13, 2013

Bitcoin is a digital currency that has increased in value in US$ by 900% over the past six months. Jason Kuznicki says Bitcoin is definitely a speculative bubble and has three graphs to illustrate his point. I found this one particularly interesting…it plots transactions vs. total Bitcoin market cap:

Bitcoin Transactions

This chart shows a dramatic reduction in the total number of transactions, irrespective of size, per dollar of bitcoin’s market cap, from December 2012 — December 2013. In absolute terms, market cap has generally gone up, and the number of transactions has mostly just bounced around a lot. The total value of bitcoin is going up, but it’s mostly getting parked rather than being put to work. Apparently there just aren’t a lot of appealing ways to spend bitcoin, anecdotal news stories to the contrary notwithstanding.

Instead, an increasing amount of bitcoin’s putative value (as measured in USD) is being squirreled away by larger and larger miner-investors. It’s not fueling a diversifying, all-bitcoin economy: if it were, transactions would be keeping up with or even outpacing market cap, particularly if bitcoiners came to rely increasingly on bitcoins and decreasingly on dollars for day-to-day purchases. That’s very clearly not happening.

The Wire’s Omar Little once said to Marlo Stanfield, “Man, money ain’t got no owners, only spenders.” Bitcoin seems to have the opposite problem. (via mr)

French cafe charges extra for rudeness

posted by Jason Kottke   Dec 12, 2013

French Rude Cafe

A cafe in Nice, France charges rude customers five times more for a cup of coffee than those who say hello and please.

“A coffee” will set you back €7, according to the sign, while “a coffee please” is a little more affordable, at €4.25.

If you want keep your expenses down, and stay friends with your local barista, however, the best option is “Hello, a coffee please,” which will only cost you €1.40.

The manager says that although the pricing scheme has never been enforced, customer civility is up. Cheekiness is on the rise as well:

“Most of my customers are regulars and they just see the funny side and exaggerate their politeness,” he said, adding “They started calling me ‘your greatness’ when they saw the sign.”

(via eater)

Mind the income gap

posted by Jason Kottke   Dec 09, 2013

We are divided by an increasingly wide income gap. Often, this gap can be seen from across a street or park (even if we sometimes try not to look). The NYT takes us for a journey into the world of a homeless girl named Dasani in a multipart piece called Invisible Child:

On the Brooklyn block that is Dasani’s dominion, shoppers can buy a $3 malt liquor in an airless deli where food stamps are traded for cigarettes. Or they can cross the street for a $740 bottle of chardonnay at an industrial wine shop accented with modern art.

Here’s David Simon, creator of The Wire, on the two Americas:

I live in one, on one block in Baltimore that is part of the viable America, the America that is connected to its own economy, where there is a plausible future for the people born into it. About 20 blocks away is another America entirely. It’s astonishing how little we have to do with each other, and yet we are living in such proximity.

How to make a t-shirt

posted by Jason Kottke   Dec 03, 2013

From the cotton in the fields to the manufacturing machines to the container ships, NPR’s Planet Money looks at the often complex world behind the making of a simple t-shirt.

We flew drones over Mississippi. We got mugged in Chittagong, Bangladesh. We met people whom we’ll never forget — the actual people who make our clothing. At every location we had radio reporters and videographers.

Amazon Prime Air

posted by Jason Kottke   Dec 02, 2013

You’re probably sick of this news already, but Amazon says they’re working on 30-minute package delivery by drone.

The goal of this new delivery system is to get packages into customers’ hands in 30 minutes or less using unmanned aerial vehicles.

Putting Prime Air into commercial use will take some number of years as we advance the technology and wait for the necessary FAA rules and regulations.

Back in January, riffing off a piece by John Robb, I speculated that Amazon would be an early mover into delivery-by-drone:

More likely that Amazon will buy a fledgling drone delivery company in the next year or two and begin rolling out same-day delivery of items weighing less than 2 pounds in non-urban areas where drone flights are permitted.

Tyler Cowen is already out of the gate this morning talking about the economics of drone delivery:

You would buy smaller size packages and keep smaller libraries at home and in your office. Bookshelf space would be freed up, you would cook more with freshly ground spices, the physical world would stand a better chance of competing with the rapid-delivery virtual world, and Amazon Kindles would decline in value.

But for now, Amazon Prime Air sure is providing lots of Cyber Monday PR for Amazon.

Convert money to happiness with expensive wine

posted by Jason Kottke   Nov 13, 2013

Felix Salmon shares perhaps the most reliable technique for turning money into happiness: buying and drinking expensive wine.

But here’s the trick: if you can’t buy happiness by spending more money on higher quality, then you can buy happiness by spending money taking advantage of all the reasons why people still engage in blind tastings, despite the fact that they are a very bad way to judge a wine’s quality. If you know what the wine you’re tasting is, if you know where it comes from, if you know who made it, if you’ve met the winemaker, and in general, if you know how expensive it is — then that knowledge deeply affects — nearly always to the upside — the way in which you taste and appreciate the wine in question.

Restaurant ditches tipping, service gets better

posted by Jason Kottke   Sep 30, 2013

Jay Porter recently wrote a series of posts about his experience running a restaurant that abolished tipping. Here’s part one:

This is a summary of the experiences I had in our no-tipping lab, and in my next few posts I’ll dig a little deeper into each of them. Then I’ll finish this series by talking about what I’ve learned this year from a couple new friends who are researchers from the University of Guelph, and who have brought me in contact with some deeper thoughts about the tipping issue, from the social justice side. After seeing what they and their colleagues have uncovered, I’ve become convinced that thoughtful cultures who value civil rights will make tipping not just optional but illegal; and that this could actually happen sooner rather than later, when courts assess the reality of the situation.

If you want the Cliff Notes version, Porter wrote a shorter piece for Slate.

When we switched from tipping to a service charge, our food improved, probably because our cooks were being paid more and didn’t feel taken for granted. In turn, business improved, and within a couple of months, our server team was making more money than it had under the tipped system. The quality of our service also improved. In my observation, however, that wasn’t mainly because the servers were making more money (although that helped, too). Instead, our service improved principally because eliminating tips makes it easier to provide good service.

The Five Cognitive Distortions of People Who Get Stuff Done

posted by Jason Kottke   Sep 10, 2013

This is a presentation and therefore missing a bunch of key context, but Michael Dearing’s The Five Cognitive Distortions of People Who Get Stuff Done is interesting reading nonetheless. The five distortions are:

1. Personal exceptionalism
2. Dichotomous thinking
3. Correct overgeneralization
4. Blank canvas thinking
5. Schumpeterianism

That last one is likely a head-scratcher to those of us without economics backgrounds; here’s what Dearing has to say about it:

Definition - sees creative destruction as natural, necessary, and as their vocation

Benefits - fearlessness, tolerance for destruction and pain

Deadly risk - heartless ambition, alienation

(via ★interesting)

Consider the economics of lobster

posted by Jason Kottke   Aug 20, 2013

There are a lot of lobsters in the sea. You could even call it a glut. Over the past few years, the massive lobster harvests have resulted in a significant reduction in what buyers are paying for a lobster off the boat. So why aren’t we seeing major price drops at our local restaurants? Here’s part of the reason: A luxury good is considered a luxury good in part because it’s priced like one. Cheap lobster could throw the rest of your menu into chaos.

Studies have shown that people prefer inexpensive wines in blind taste tests, but that they actually get more pleasure from drinking wine they are told is expensive. If lobster were priced like chicken, we might enjoy it less.

In The New Yorker, James Surowiecki cracks open the surprising complexity of lobster prices.

The economics of Trading Places

posted by Jason Kottke   Jul 11, 2013

A recent episode of Planet Money explores what the movie Trading Places can teach us about financial markets.

On today’s show, we talk to commodities traders to answer one of the most important questions in finance: What actually happens at the end of Trading Places?

We know something crazy happens on the trading floor. We know that Eddie Murphy and Dan Aykroyd get rich and the Duke brothers lose everything. But how does it all happen? And could it happen in the real world?

Also on the show: The “Eddie Murphy Rule” that wound up in the the big financial overhaul law Congress passed in 2010.

One of my favorite movie moments is Eddie Murphy’s breaking of the fourth wall in this Trading Places scene:

The power of failure

posted by Jason Kottke   Jun 27, 2013

Malcolm Gladwell on economist Albert Hirschman, who embraced the roles of adversity, anxiety, and failure in creativity and success.

“The Principle of the Hiding Hand,” one of Hirschman’s many memorable essays, drew on an account of the Troy-Greenfield “folly,” and then presented an even more elaborate series of paradoxes. Hirschman had studied the enormous Karnaphuli Paper Mills, in what was then East Pakistan. The mill was built to exploit the vast bamboo forests of the Chittagong Hill Tracts. But not long after the mill came online the bamboo unexpectedly flowered and then died, a phenomenon now known to recur every fifty years or so. Dead bamboo was useless for pulping; it fell apart as it was floated down the river. Because of ignorance and bad planning, a new, multimillion-dollar industrial plant was suddenly without the raw material it needed to function.

But what impressed Hirschman was the response to the crisis. The mill’s operators quickly found ways to bring in bamboo from villages throughout East Pakistan, building a new supply chain using the country’s many waterways. They started a research program to find faster-growing species of bamboo to replace the dead forests, and planted an experimental tract. They found other kinds of lumber that worked just as well. The result was that the plant was blessed with a far more diversified base of raw materials than had ever been imagined. If bad planning hadn’t led to the crisis at the Karnaphuli plant, the mill’s operators would never have been forced to be creative. And the plant would not have been nearly as valuable as it became.

“We may be dealing here with a general principle of action,” Hirschman wrote, “Creativity always comes as a surprise to us; therefore we can never count on it and we dare not believe in it until it has happened. In other words, we would not consciously engage upon tasks whose success clearly requires that creativity be forthcoming. Hence, the only way in which we can bring our creative resources fully into play is by misjudging the nature of the task, by presenting it to ourselves as more routine, simple, undemanding of genuine creativity than it will turn out to be.”

Gladwell’s piece is based on Jeremy Adelman’s recent biography of Hirschman, Worldly Philosopher.

Tipping should be outlawed

posted by Jason Kottke   Jun 21, 2013

Elizabeth Gunnison Dunn offers six reasons why tipping, particularly at restaurants, should be eliminated.

The friendships I’ve formed with restaurant employees over the years have made me think seriously about why hospitality workers are singled out among America’s professionals to endure a pass-the-hat system of compensation. Why should a server’s pay depend upon the generosity — not to mention dubious arithmetic skills — of people like me?

(via @LonestarTacoNYC, who are starting back up at New Amsterdam Market this weekend)

The recipe for the cronut

posted by Jason Kottke   Jun 04, 2013

Cronut

Cronuts are donuts made from croissant dough and they are all the rage here in NYC. They were invented by chef Dominique Ansel and they are only available in limited quantities at his bakery in Soho. Apparently people start lining up for them at 6am and all 200 of the world’s daily supply of cronuts are gone within minutes of opening. Naturally, a black market has sprung up, with cronuts selling on Craigslist for upwards of $25/item:

Cronut Craigslist

Kevin Roose has some ideas for Ansel about expanding the reach of the cronut, but in the meantime, Edd Kimber replicated the treat at home with a quickie croissant dough.

Since I wont be in New York any time soon I thought I would see if I could replicate them at home, and you know what? They are pretty damn good! Now the dough I’m using isnt a proper croissant dough, its my quick dough made with just 20 minutes active work which, compared to traditional croissant dough is a snap to make.

Update: Pillsbury has gotten into the act as well with a cronut recipe that uses their crescent dough.

Update: In his forthcoming cookbook, Ansel reveals the recipe for the cronut and it’s not for the faint of heart…the recipe takes three days to make.

The updated Big Mac index

posted by Jason Kottke   Feb 04, 2013

For their Big Mac index (a way to look at currency exchange using global Big Mac pricing) this year, the Economist has released an interactive tool for exploring the data.

The Big Mac index was invented by The Economist in 1986 as a lighthearted guide to whether currencies are at their “correct” level. It is based on the theory of purchasing-power parity (PPP), the notion that in the long run exchange rates should move towards the rate that would equalise the prices of an identical basket of goods and services (in this case, a burger) in any two countries. For example, the average price of a Big Mac in America at the start of 2013 was $4.37; in China it was only $2.57 at market exchange rates. So the “raw” Big Mac index says that the yuan was undervalued by 41% at that time.

They’re also made the data set available in .xls format for at-home analysis.

Crooks are stealing Tide to trade it for drugs

posted by Jason Kottke   Jan 08, 2013

I had no idea that laundry detergent could be so interesting. Procter & Gamble has done such a good job positioning Tide as a luxury laundry detergent that they can charge a premium for it and people will still buy.

Shoppers have surprisingly strong feelings about laundry detergent. In a 2009 survey, Tide ranked in the top three brand names that consumers at all income levels were least likely to give up regardless of the recession, alongside Kraft and Coca-Cola. That loyalty has enabled its manufacturer, Procter & Gamble, to position the product in a way that defies economic trends. At upwards of $20 per 150-ounce bottle, Tide costs about 50 percent more than the average liquid detergent yet outsells Gain, the closest competitor by market share (and another P&G product), by more than two to one. According to research firm SymphonyIRI Group, Tide is now a $1.7 billion business representing more than 30 percent of the liquid-detergent market.

Because of this premium status and because laundry detergent is not usually well-guarded in grocery stores, Tide has become a large target for theft and subsequent resale, either for cash or crack on street corners across the nation.

What did thieves want with so much laundry soap? To find out, he and his unit pored over security recordings to identify prolific perpetrators, whom officers then tracked down and detained for questioning. “We never promised to go easy on them, but they were willing to talk about it,” Thompson says. “I guess they were bragging.” It turned out the detergent wasn’t being used as an ingredient in some new recipe for getting high, but instead to buy drugs themselves. Tide bottles have become ad hoc street currency, with a 150-ounce bottle going for either $5 cash or $10 worth of weed or crack cocaine. On certain corners, the detergent has earned a new nickname: “Liquid gold.” The Tide people would never sanction that tag line, of course. But this unlikely black market would not have formed if they weren’t so good at pushing their product.

Please don’t let this be a hoax, it’s almost too good to be true. (via @mulegirl)

The autism advantage

posted by Jason Kottke   Nov 29, 2012

In the NY Times, Gareth Cook writes about the advantages some companies have found in employing people with autism.

To his father, Lars seemed less defined by deficits than by his unusual skills. And those skills, like intense focus and careful execution, were exactly the ones that Sonne, who was the technical director at a spinoff of TDC, Denmark’s largest telecommunications company, often looked for in his own employees. Sonne did not consider himself an entrepreneurial type, but watching Lars — and hearing similar stories from parents he met volunteering with an autism organization — he slowly conceived a business plan: many companies struggle to find workers who can perform specific, often tedious tasks, like data entry or software testing; some autistic people would be exceptionally good at those tasks. So in 2003, Sonne quit his job, mortgaged the family’s home, took a two-day accounting course and started a company called Specialisterne, Danish for “the specialists,” on the theory that, given the right environment, an autistic adult could not just hold down a job but also be the best person for it.

I particularly liked Tyler Cowen’s observations:

Tyler Cowen, an economist at George Mason University (and a regular contributor to The Times), published a much-discussed paper last year that addressed the ways that autistic workers are being drawn into the modern economy. The autistic worker, Cowen wrote, has an unusually wide variation in his or her skills, with higher highs and lower lows. Yet today, he argued, it is increasingly a worker’s greatest skill, not his average skill level, that matters. As capitalism has grown more adept at disaggregating tasks, workers can focus on what they do best, and managers are challenged to make room for brilliant, if difficult, outliers. This march toward greater specialization, combined with the pressing need for expertise in science, technology, engineering and mathematics, so-called STEM workers, suggests that the prospects for autistic workers will be on the rise in the coming decades. If the market can forgive people’s weaknesses, then they will rise to the level of their natural gifts.

Warren Buffett: a minimum tax rate for the wealthy

posted by Jason Kottke   Nov 28, 2012

In an op-ed for the NY Times, Warren Buffett proposes a minimum tax on high incomes, specifically “30 percent of taxable income between $1 million and $10 million, and 35 percent on amounts above that”. He argues that higher tax rates will not curtail investment activity.

Between 1951 and 1954, when the capital gains rate was 25 percent and marginal rates on dividends reached 91 percent in extreme cases, I sold securities and did pretty well. In the years from 1956 to 1969, the top marginal rate fell modestly, but was still a lofty 70 percent - and the tax rate on capital gains inched up to 27.5 percent. I was managing funds for investors then. Never did anyone mention taxes as a reason to forgo an investment opportunity that I offered.

Under those burdensome rates, moreover, both employment and the gross domestic product (a measure of the nation’s economic output) increased at a rapid clip. The middle class and the rich alike gained ground.

(via df)

What sort of town is Richard Scarry’s Busytown?

posted by Jason Kottke   Nov 28, 2012

From a planning and transportation professional, a deconstruction of Busytown, the fictional town that features in many of Richard Scarry’s children’s books, including What Do People Do All Day?, Busy, Busy Town, and my personal favorite, Cars and Trucks and Things That Go.

Scarry moved to Switzerland in 1968, and if nothing else, Swiss architecture permeates the old town center of What Do People Do All Day. The Town Hall of Busytown on the cover is nothing if not Tudor. There is a small gate through which a small car is driving. Something to note about the vehicles in Busytown is that they are all just the right size for the number of passengers they carry. The Bus on the cover is full, with a hanger-on. The taxi holds one driver in the front and one passenger in the rear. The police officer (Seargant Murphy) is riding a motorcycle. When he has a passenger, the motorcycle always has a sidecar. Similarly, each window in town has someone in it, sometimes more than one person. Of course, this is a busy town, so the activity makes sense. The cover of this includes the grocery store, butcher, and baker (no supermarkets in 1968 Busytown), one block in front of Town Hall. One thing to note about the Butcher is that he is a pig, and clearly butchering sausages.

The self-slaughter and cannibalism of the pigs is documented in Merlin Mann’s Scarry Pigs in Peril Flickr set.

Scarry Pig Butcher

See also this examination of What Do People Do All Day?:

Nonetheless, Busytown is a place that works. Literally, in that it appears to enjoy full employment, and also in the sense that it has few obvious social problems. The police force, consisting of Sergeant Murphy, Policeman Louie and their chief, is charged with ‘keeping things safe and peaceful’ and ‘protecting the townspeople from harm’, which appears to largely consist of directing traffic, ticketing hoons and apprehending the town’s notorious thief, Gorilla Banana [sic].

Now of course one could opine that it’s in fact diffuse surveillance and self-surveillance that keep such remarkable order. All those open windows and doors, all that neighbourly cheerfulness, have a slightly sinister edge to them, if you’re inclined to look for it, as do the lengths that some of the citizens will go to in order to promote proper behaviour amongst children.

(via @inthefade)

Update: And here’s another installment of the Busytown police blotter.

Traffic officer reported busiest traffic jam ever at intersection of Main and Hippopotamus. Gridlock started when a peanut car stalled in the intersection and the elderly cricket driver was unable to restart the vehicle. Officer and several drivers assisted the elderly cricket in moving his vehicle to the side of the road, where it was then struck by an alligator car driven by a female rabbit. Officer reported smelling alcohol in the female rabbit’s breath and placed her in handcuffs until backup arrived. Officers then cleared the jam with the aid of two tow trucks.

(thx, elaine)

Serfing the web

posted by Jason Kottke   Nov 26, 2012

I wondered how long it would be before someone connected Facebook and especially Twitter with the idea of extractive and inclusive economic systems forwarded by Daron Acemoglu and James Robinson in Why Nations Fail. The winner, in a delightfully over-the-top fashion, is David Heinemeier Hansson from 37signals.

Twitter started out life as a wonderfully inclusive society. There were very few rules and the ones there were the people loved. Thou shall be brief, retweet to respect. Under this constrained freedom, Twitter prospered and grew rapidly for the joy of all.

Budding entrepreneurs built apps that made life better for everyone. Better, in fact, than many of Twitter’s own attempts. They competed for attention on a level playing field and the very best rose to the top. Users saw that this was good and rewarded Twitter with their attention. Twitter grew.

Unfortunately this inclusive world was not meant to last. From the beginning, an extractive time bomb was ticking. One billion dollars worth of eagerness for return. Hundreds and hundreds of hungry mouths to feed in a San Francisco lair.

And thus began Twitter’s descent into the extractive.

Chrystia Freeland provided the gist of the book in a NY Times essay earlier in the fall:

Extractive states are controlled by ruling elites whose objective is to extract as much wealth as they can from the rest of society. Inclusive states give everyone access to economic opportunity; often, greater inclusiveness creates more prosperity, which creates an incentive for ever greater inclusiveness.

Time for some new economic rules?

posted by Jason Kottke   Nov 15, 2012

From before the election, which seems like it was several months ago already, a piece from Clayton Christensen about how investors and companies should shift their thinking about allocating capital. Christensen’s gist is that efficiency is creating pools of excess capital which is not being reinvested into the types of industry that create jobs.

The Fed has been injecting more and more capital into the economy because — at least in theory — capital fuels capitalism. And yet cash hoards in the billions are sitting unused on the pristine balance sheets of Fortune 500 corporations. Billions in capital is also sitting inert and uninvested at private equity funds.

Capitalists seem almost uninterested in capitalism, even as entrepreneurs eager to start companies find that they can’t get financing. Businesses and investors sound like the Ancient Mariner, who complained of “Water, water everywhere — nor any drop to drink.”

It’s a paradox, and at its nexus is what I’ll call the Doctrine of New Finance, which is taught with increasingly religious zeal by economists, and at times even by business professors like me who have failed to challenge it. This doctrine embraces measures of profitability that guide capitalists away from investments that can create real economic growth.

Read all the way to end; Christensen offers some suggestions for shifting capital allocation.

Is the US becoming an extractive state?

posted by Jason Kottke   Oct 22, 2012

Following up on her piece in the New Yorker on how hedge fund billionaires have become disillusioned with President Obama, Chrystia Freeland says that the 1% are repeating a mistake made many times throughout history of moving from an inclusive economic system to an extractive one.

Extractive states are controlled by ruling elites whose objective is to extract as much wealth as they can from the rest of society. Inclusive states give everyone access to economic opportunity; often, greater inclusiveness creates more prosperity, which creates an incentive for ever greater inclusiveness.

Freeland is riffing on an argument forwarded by Daron Acemoglu and James Robinson in Why Nations Fail. Their chief example cited by Freeland is that of Venice:

In the early 14th century, Venice was one of the richest cities in Europe. At the heart of its economy was the colleganza, a basic form of joint-stock company created to finance a single trade expedition. The brilliance of the colleganza was that it opened the economy to new entrants, allowing risk-taking entrepreneurs to share in the financial upside with the established businessmen who financed their merchant voyages.

Venice’s elites were the chief beneficiaries. Like all open economies, theirs was turbulent. Today, we think of social mobility as a good thing. But if you are on top, mobility also means competition. In 1315, when the Venetian city-state was at the height of its economic powers, the upper class acted to lock in its privileges, putting a formal stop to social mobility with the publication of the Libro d’Oro, or Book of Gold, an official register of the nobility. If you weren’t on it, you couldn’t join the ruling oligarchy.

The political shift, which had begun nearly two decades earlier, was so striking a change that the Venetians gave it a name: La Serrata, or the closure. It wasn’t long before the political Serrata became an economic one, too. Under the control of the oligarchs, Venice gradually cut off commercial opportunities for new entrants. Eventually, the colleganza was banned. The reigning elites were acting in their immediate self-interest, but in the longer term, La Serrata was the beginning of the end for them, and for Venetian prosperity more generally. By 1500, Venice’s population was smaller than it had been in 1330. In the 17th and 18th centuries, as the rest of Europe grew, the city continued to shrink.

BTW, Acemoglu and Robinson have been going back and forth with Jared Diamond about the latter’s geographical hypothesis for national differences in prosperity forwarded in Guns, Germs, and Steel. I read 36% of Why Nations Fail earlier in the year…I should pick it back up again.

Six policies economists love that politicians hate

posted by Jason Kottke   Jul 25, 2012

A list of economic policies that, according to economists, would benefit the economy but would never fly for political reasons.

Four: Eliminate all income and payroll taxes. All of them. For everyone. Taxes discourage whatever you’re taxing, but we like income, so why tax it? Payroll taxes discourage creating jobs. Not such a good idea. Instead, impose a consumption tax, designed to be progressive to protect lower-income households.

Five: Tax carbon emissions. Yes, that means higher gasoline prices. It’s a kind of consumption tax, and can be structured to make sure it doesn’t disproportionately harm lower-income Americans. More, it’s taxing something that’s bad, which gives people an incentive to stop polluting.

A brief history of money

posted by Jason Kottke   Jul 03, 2012

Writing for IEEE Spectrum, New Yorker staff writer James Surowiecki writes about the development and evolution of money, from that of tribal societies to today’s highly abstracted currencies.

It’s really in the seventh century B.C.E., when the small kingdom of Lydia introduced the world’s first standardized metal coins, that you start to see money being used in a recognizable way. Located in what is now Turkey, Lydia sat on the cusp between the Mediterranean and the Near East, and commerce with foreign travelers was common. And that, it turns out, is just the kind of situation in which money is quite useful.

To understand why, imagine doing a trade in the absence of money-that is, through barter. (Let’s leave aside the fact that no society has ever relied solely or even largely on barter; it’s still an instructive concept.) The chief problem with barter is what economist William Stanley Jevons called the “double coincidence of wants.” Say you have a bunch of bananas and would like a pair of shoes; it’s not enough to find someone who has some shoes or someone who wants some bananas. To make the trade, you need to find someone who has shoes he’s willing to trade and wants bananas. That’s a tough task.

With a common currency, though, the task becomes easy: You just sell your bananas to someone in exchange for money, with which you then buy shoes from someone else. And if, as in Lydia, you have foreigners from whom you’d like to buy or to whom you’d like to sell, having a common medium of exchange is obviously valuable. That is, money is especially useful when dealing with people you don’t know and may never see again.

In this same vein, this reply on Reddit to “Where has all the money in the world gone?” is also worth a read.

The thing to remember is that all throughout, from the initial trade to this central-banking system, all of this money is debt. It is IOUs, except instead of being an IOU that says “Kancho_Ninja will give one bushel of apples to the bearer of this bond in October”, it says “Anyone in town will give you anything worth one bushel of apples in trade.”

The money is not an actual thing that you can eat or wear or build a house with, it’s an IOU that is redeemable anywhere, for anything, from anyone. It is a promise to pay equivalent value at some time in the future, except the holder of the money can call on anybody at all to fulfill that promise — they don’t have to go back to the original promiser.