Centives

Alex Rosenberg and Tyler Curtain pondered “is economics all bunk?”

• Students who graduate with a degree on economics normally get a “bachelor of science” yet unlike with the other “hard” sciences economics has not improved its predictive power over the years.
• It is easy to mistake economics for science. It uses the same equations and theorems, and there are parallels in some of the assumptions the two fields make. Despite the scientific rigor though economic though has not become more accurate over time.
• Perhaps the best indication that economics is not a science is that economists often refuse to adjust their theories – even in the face of conflicting evidence.
• Yet economics isn’t completely useless. It shows us how to manage and fix institutions such as the Federal Reserve, or create new ones such as electromagnetic spectrum auctions.
• Thus economic theory is more like music theory than Newtonian theory – expertise can help to produce harmony and not much more.

You can read the full argument here.

Source: The New York Times

Could we soon be comparing wines from Paris to those from Beijing? Celia Hatton wrote:

• There is demand for good wine in China – Chinese are the second biggest buyers of top claret after Germany.
• Currently half of all wine imported into China comes from France.
• Yet China has long had a domestic wine industry. Fifteen years ago when experts tasted Chinese wines they concluded that it tasted like cough syrup.
• Since then things have improved – in 2011 a Chinese winery beat French rivals to win an international gold medal.
• China is now the eight largest producer of wine and is expected to climb another two spots in the next couple years.
• Yet China may never unseat the top wine producers. Despite its size there is no good region in China to grow grapes. Those that are dry enough are too cold in the winter.
• This shortage of quality wine grapes means that most Chinese wine is made of low quality grapes that aren’t sweet enough to produce interesting flavours

Read more about the top producers of wine in China, why there is reason to be optimistic, and more over here.

Source: BBC

The Economist looked at the odd case of cigarette bonds:

• In 1998 the major cigarette manufacturers agreed to make annual payments to the American government to cover the historic and future healthcare costs caused by their products.
• Instead of waiting to receive these payments over time state governments decided to sell bonds – investors would pay an initial sum to the government up-front, and the government would send future payments from the cigarette manufacturers to the investors.
• These are about $100 billion of these bonds in the market today.
• Yet they aren’t making as much money as investors had expected. Cigarette sales have fallen faster than expected and since that means that fewer people have cigarette-related health issues, the companies have to make fewer payments.
• Falling rates of smoking are driven, in part, by government efforts to ban indoor smoking and raise cigarette taxes. This means the governments played it pretty smart by selling off the bonds…then enacting measures that would make them less valuable.

Read more about some states that may still have to pay for the bonds, why cigarette makers agreed to the settlement, and who bought these bonds over here.

Source: The Economist

Forget smartwatches and glasses, smart teeth are the future writes The Economist:

• Scientists have figured out how to put accelerometers in a person’s mouth, allowing them to monitor what the mouth is doing.
• This has medical applications – it can track how often people are eating when they’re meant to be on a diet, or how often they cough.
• While every person moves their mouth in different ways the current prototypes can recognize what the mouth is up to over 90% of the time.
• This technology might be implanted into us through dentures…or they could be attached to our existing teeth and connected, of course, through Bluetooth.

Read more about the technology here.

Source: The Economist

Signed up for a supermarket loyalty rewards program? It’s a sham writes Brian Palmer:

• Loyalty programs were invented by an airline company and they make sense in industries where companies can’t differentiate themselves from their competitors.
• Supermarkets can though. Companies that attract customers through high quality products and exceptional service – such as Whole Foods and Trader Joe’s – don’t have rewards programs because their shopping experience speaks for itself.
• The supermarkets that do have loyalty programs thus feel that there is no reason for shoppers to shop with them and need to provide additional incentives. This should tell you something about them.
• These programs aren’t that great for supermarkets either. They should entice the most loyal customers to shop more – but the rewards are often so generous that retailers with loyalty reward programs don’t make any money from their top customers.
• Loyalty programs are also used to mine data. Tesco will look at your purchase history and try to market similar items with higher mark-ups to generate more profits from individuals. If you don’t shop with them for a while they’ll send coupons to lure you in. This kind of sounds like an abusive relationship.

The full article talks a lot more about the economics of the rewards card industry, and an experiment that everybody should consider engaging in. Read it here. Check out an earlier post on how Target uses its rewards program to manipulate you here.

Source: Slate

Microsoft is purchasing Nokia, the Finnish communications and IT company – or at least the parts of Nokia that most consumers are familiar with. Tim Fernholz looked at what this meant for Finland:

• Far from being a disaster for Finland, the sale of Nokia might be a blessing in disguise. The company was a slight drag on Finland’s economy last year
• The $7.2 billion that Microsoft is paying for it represents 2.6% of Finland’s GDP and will be a nice boost of economic stimulus.
• Microsoft is also keeping Nokia staffers in the country and is looking to build a $250 million data center in the country.
• With Finland now being a Microsoft research hub, the country will benefit from the expertise and become more oriented towards higher value software and IT services.

Read more about what the Nokia acquisition means here.

Source: Quartz

3-D printing is often talked about as the future of manufacturing. What people don’t seem to realize is that 3-D printing is being used to make products today. The Economist posted a broad article looking at the industry, and its current applications:

• 3-D printing is useful in the medical field as each patient is different and so mass produced items don’t work as well as items built specifically for individuals. Individualized hearing aid shells and braces are now built based on scans of a patient’s face.
• The aerospace industry is also using 3-D printing since the volume of goods required is too small to be suitable for mass production. China’s taikonauts (Chinese astronauts) sit in chairs specifically designed and printed to fit their body shape.
• Customized spare parts for airplanes are also printed – especially for older planes for which parts may no longer be available.
• The average F-18, for example, has 90 3-D printed parts even though the planes have been around for twenty years – well before the rise of 3-D printing.
• The high cost of the materials or ‘ink’ used by 3-D printers is partly what’s holding 3-D printing back. The cost is mostly a result of 3-D printer makers requiring that their own ink be used with their printers – and as with normal printers, a hefty markup is charged on the ink.

The full article is a much more expansive look at the current and future state of the 3-D printing industry. It talks about how workers and China don’t really have much reason to fear 3-D printing, the companies that might dominate the future, and a senior executive that might have to reverse his name. Read it here.

Source: The Economist

Chris Bucholz looked at some of the odder dating scenes around the world:

• Iceland has a population of just 300,000, and this led to a problem where people were unknowingly dating their cousins. The Cousin Alarm app is now used so that Icelanders can find out if they’re inadvertently seeing relatives.
• In Indian arranged marriages it is important for the families to be sure of the quality of the pairing. And so due diligence is done through private investigators who conduct background checks on the bride and groom.
• In Japan men seem to be uninterested in sex. In fact men falling in love with pillows or video games – often imagined to be underage – are an increasing issue.
• Singapore has such a low birth rate that the government encourages successful individuals to get romantically involved through government organized cruises and dances.

The full list is funny, well written, and talks about how China in many ways faces the opposite problem to Japan and why unwed couples should perhaps be careful on the streets of India over here.

Source: Cracked

The MIT Technology Review looked at a new way to grade homework:

• CrowdGrader lets students submit their homework, and then redistributes that homework to five other students to be assessed.
• To ensure that the students do a good job in assessing other people’s work, their own grade depends on the quality of their assessment of others.
• Students benefit because when teachers grade homework they only have so much time to devote to each submission. But the student-graders provide more detailed assessments, and there are multiple students providing feedback.
• Students also benefit from reviewing other people’s work by seeing how different methods were used to solve the same problem, and the mistakes that other students made. This ultimately means that the material is better learnt.

Read more about some of the drawbacks of the approach, what this means for the future of education, and more over here.

Source: MIT Technology Review