Nationals Win Me Over. Reluctantly.

In March, I had my run-in with the Washington Nationals ticket office, after which point I said I wouldn't buy season tickets because, as I wrote later:

"I can't give you the satisfaction of saying you talked the crazy blogger guy into buying season tickets after all."

Well, since that time, Sharon and I have attended several games this season. I finally caved and bought a flex plan, which involves getting tickets to three games in order to get a fourth free.

I should have already done this several times over this season, as we go so often and the Nats have become Sharon's favorite team.

I guess my love of baseball and desire to economize on ticket purchases, as well as Sharon's inexplicable fandom of relief pitcher Tyler Clippard, have won out over my pride. You win, Nationals ticketing office.

After AT&T's Cap, My Data Use Soared

My AT&T data use, by month. AT&T began to offer discounts for limited data plans, effective in the latest billing cycle.

The Freakonomics blog recently wondered if AT&T's switch to offering limited data plans for a discount to iPhone users might actually increase some people's usage, as they no longer feel as guilty about "hogging the network" as they did when everyone had unlimited plans (more on the details here).

I'm living proof. When the offer was announced, I noticed that my usage had always been well under the 2GB-a-month limit, which I could switch to and save a few bucks a month. I happily made the switch, and my usage the last month was almost twice as high as my average usage in recent months.

This is the same effect that occurred with the famous Israeli day care that began charging parents a fine if they picked up their children late. Suddenly, late pickups soared, as parents felt that they had morally balanced their books by paying the fine and thus were entitled to show up late.

(Side note: Isn't technology amazing? I used 500 MB of data over 3G signals last month, not to mention many more over Wi-Fi at home and at the office. I remember that my grandpa's first computer had an 80 MB hard drive.)

Wine from a Machine in Pennsylvania

One of Mancur Olson's principal points in "The Rise and Decline of Nations" is about the dangers of special interest groups imposing costs on the rest of society in order to win a larger share of economic profits.

This seems to describe perfectly the wine lobby in Pennsylvania (Associated Press):

HARRISBURG, Pa. (AP) -- Swipe your driver's license, look into the camera, blow into the breath sensor and - voila! - you have permission to buy a bottle of wine from a vending machine.

Pennsylvania, which has some of the most Byzantine liquor laws in the nation, recently introduced the country's first wine "kiosks." If the machines are successful in their test run inside two grocery stores, the state Liquor Control Board could place the high-tech alcohol automats in about 100 others.

...

The vending machines are a testament to both the wonder of technology and the obscurity of Pennsylvania's complicated liquor laws.

Individuals can buy wine and liquor for home consumption only in state-owned stores staffed by public employees. Private beer distributors sell cases and kegs only. Licensed corner stores, delis, bars and restaurants can sell beer to go, but only up to two six-packs per customer.

Hat tip to Neatorama.

More on the Exponential Discount Rate

Yesterday, I wrote about the wonderful application of economic theory to a dilemma from Seinfeld. The paper I mentioned uses an exponential discount factor to model how people value pleasure today versus pleasure in the far future.

I came across another example of this concept in a passage from a paper on the food stamp nutrition cycle. The author's first paragraph, copied below (emphasis mine), discussed the implications of the exponential model, before quickly abandoning it for alternative approaches:

Consider a consumer who is indifferent between enjoying one additional dollar of consumption today and 99.6 additional cents of consumption tomorrow. Such an individual has a daily discount factor of 0.996, and if she is an exponential discounter her annual discount factor will be about 0.23 (corresponding to an annual discount rate of about 146 percent). She would therefore strictly prefer 24 dollars of additional consumption today to 100 dollars of additional consumption one year from now, and would happily accept seven cents today in exchange for 100 dollars in five years.

If you ever so slightly prefer consumption today over consumption tomorrow, you'll prefer pennies today over huge amount of money in the far future, according to the model.

What should economists do in the face of such a surprising result? It's a tough question. We could call the conclusion absurd and modify the model until it produces an alternative conclusion that sounds more reasonably. Or we could go against our intuition and attempt to test this result empirically.

Spongeworthiness: An Economic Model

Avinash Dixit, co-author of the outstanding "The Art of Strategy," recently published a paper exploring the Seinfeld episode in which Elaine must ration her remaining contraceptive sponges.

Dixit's model can give Elaine precise advice once she establishes how many sponges she has remaining and how she feels about the trade-offs between "pleasure" today and "pleasure" in the future (the discount rate).

If sponges are plentiful and Elaine's discount rate is fairly low, any man will do. But if her discount rate is high, she'll wait for a nearly perfect man no matter how many sponges she has.

I've finally had enough math to be able to follow the paper's model. I wondered if it made me a bad person that I labored through understanding this model when I usually just skim over models involving, say, optimal portfolio theory.

Hat tip to the Freakonomics blog.

Metro 1, Econ 0

There's an old joke among free-market types where one economist sees a $20 on the ground and delightedly bends over to pick it up. The other economist scolds him for the effort, saying, "If there really were a $20 on the ground, someone would have picked it up by now. It must be an illusion."

Today, I head to the Metro for the evening commute. There are two turnstiles to enter and one to exit. Yet there is a huge line of people behind one of the enter turnstiles while the other is vacant.

I reason: if the other enter turnstile was working, someone would be using it. So I write it off as broken.

After I've waited behind 8 or 9 people for the one good turnstile, someone walks by and gets through the "broken" one without incident. I follow behind, through the turnstile that's been there all along.

So much for rational markets ...

Economic Development, Despite the Law

I am reading Hernando de Soto's "The Other Path" for an upcoming class. I highly recommend it. His points are difficult to summarize in a short blog post, but I'll do my best. Writing in 1989, de Soto and his colleagues examined the poor "informals" residing in Peru's capital, Lima.

The legal process in Peru at that time made it next to impossible for most residents to do anything through formal means. Acquiring formal housing took nearly two decades. The above photo shows de Soto's staff holding a 30-meter-long list of procedures that were required to start a small business.

So, the informals took the law into their own hands, setting up 60% of the city's housing and establishing 95% of its bus routes without the proper government endorsements. De Soto argues that such "illegal" activity did not reflect an outlaw mentality, but rather, economic entrepreneurship.

While these informal residences and businesses were surprisingly efficient, they wasted a huge amount of resources defending their property and bribing public officials. These residents had no guaranteed property rights, which severely hampered their willing to invest. After the book's publication, de Soto's organization worked with Peru's government to drastically simplify these legal processes.