Charity Boxes in Competition

I sometimes think that having read Freakonomics, its sequel Superfreakonomics, together with a whole lot of books that apply economics in non-conventional ways, I have become aware of anything that may present a natural experiment. Last week, I was attending a week-long meeting in the Cambodian city of Siem Reap and stayed at the comfortable Apsara Angkor Hotel. While there, I saw in the lobby this interesting set up which led me to question whether the size and setting of the charity boxes affects donations.

As evident in the picture, there are two boxes for two separate charities in the lobby of this hotel.The transparent box is marked with the name of a charity committed to correcting reducing child labour in urban tourism. Bear in mind that Siem Reap is a small city but has huge tourist attraction on account of the Angkor Wat complex. The second box is set up to collect money for the Cambodian Red Cross Society and is made of solid wood.

Quite aside from the fact that one of the boxes is transparent and the other opaque, there is very little difference between them as they are right next to one another. Notice that they both have the slot for enabling contribution at the top and are of roughly the same height. It therefore unlikely that one would be able to make a contribution to one purely because the other is beyond reach.

Now to the question that made me take the picture. Given that the only difference between the boxes is that one is transparent and the other opaque, is this material for the contributions received by either charity? It is clear to me that the managers at the  Apsara Angkor Hotel have unknowingly set up a fascinating experiment. With their permission, it would be interesting to compare the total contributions that the two charities receive over time in order to know whether the transparency of the box affects contributions. Of course, I make the big assumption that guests are likely to contribute to these charities equally.

An Economist Faces Price Controls

I need to take a break from writing on soccer and try to speak about applied economics for a while. A few days ago, the legislature in Kenya passed a bill that is intended to introduce price controls on a number of essential goods. With tremendous support in the Kenyan parliament, the argument was that traders charge high prices for essential commodities such as sugar, wheat, corn and cooking oil and therefore intervention through price controls would ensure that these prices remain affordable to a number of Kenyan citizens.

To start with, it is true that a majority of Kenyan citizens are extremely poor and it is understandable that legislators in Kenya who earn some of the highest wages in PPP terms should be concerned for their welfare. What worries me is whether a legislature comprised of some professionals are unable to read either history or the most basic texts in economics. Kenya has had a two decade experience with price controls that were suspended in the early 1990s and yet the country's citizens were none the richer for that. In fact, the general shortages of those same essential goods was pervasive and drove corruption and black markets in those goods.  

So i wonder why the Kenyan legislature assumes that new rice controls will yield better results today and in the future. It is just clear that this new law will be subverted both by traders and the bureaucrats who are being asked to enforce it because the Treasury is reluctant to perform that role. A second factor that offers some hope is that Kenya's president, Mwai Kibaki, is a student of economics and should proceed to  veto that bill without apologies.  I am sure that he is quite familiar with the arguments cogently presented by Lawrence Reed here.  

Why It's Time for England's FA Bosses to Read

Punditry and excuses aside, Germany completed a devastating demolition job on the English soccer team sometime yesterday. As usual, this is a traditional and emotion-laden rivalry for which newspapers and fans from both nations have gone overdrive with explanations for why one side lost and the other lost  won. Unfortunately, most of the purported explanations from the pundits and sports journalists tell make no revelations for anyone with even the simplest and objective view of the facts.

Among the explanations are a summary posited by Stephen Dubner on the Freakonomics Blog and another on the Daily Telegraph site here. And to my mind, it is understandable that English angst against foreign players is now on show on account of the fact that a number of Premier League clubs are predominantly served by non-English players.

While I do not expect that the loose punditry will lead to a firm solution, I think that many of the ideas posited are at best guesses and at worst diversions. In an earlier blog post here, i was completely skeptical that England was capable of winning the World Cup 2010. And my views were not formed out of strong conviction as much as having read through this book. It states as clearly as can be stated about England's performance in international soccer and what changes the football association would have to make to deepen the ranks from which players are recruited in addition to the scope for England's improvements. Without being a spoiler spoiling, the protectionist backlash against foreign players is not part of the solution.

I would recommend that the Football Association buy a copy for each manager, the players but that the Chairman and the board should read through it in whole. Or perhaps hire someone to present pithy summaries of its main messages to them. the tone of recriminations that i hear are proof that England will blame foreigners, the managers (especially the foreign ones) and cry for more chances for local lads. The authors, Simon Kuper and Stefan Szymanski show with data that this is unlikely to work.

World Cup 2010: Entry 2

To my mind, the first round of matches at the World Cup 2010 reveled that some teams were obviously better prepared than others and that is unsurprising. The unsurprising part is that the host nation saved its firepower for the last match and ended up with a victory that was of little consequence. So for all the goodwill from many supporters at home and abroad, the home team went out of the tournament at the first round. based on their overall performance over three matches, no sensible person would argue that their exit was unfair because Mexico and Uruguay were demonstrably better teams.  

This brings the discussion to the next "Home Teams", which are the teams from the host continent of Africa. Here too, as the SPI showed, few of them performed in a way that would suggest that African football is on a definitive rise as a force to be reckoned with in international soccer. And yet most African teams won only a single match at best and Cameroon, lost all its matches at the group stage. Apart from falling for cheap baiting by other teams, the African teams showed the inability to stay composed under pressure in addition to woeful finishing by strikers. The redeeming thing about African soccer during this tournament remains the goalkeepers who prevented them from conceding dozens of goals. Otherwise, the objective view must be that African soccer still has to resolve systemic weaknesses in team selection, managing player composure during intense pressure and better command from the skippers. Notwithstanding Ghana's qualification for the round of 16 and subsequent elimination of team USA, I do not think that it redeems the overall poor performance by the five African teams.

Finally, the fact that none of the finalists in the preceding tournament reached the round of 16 shows that four years can alter the dynamics of competition substantially. Tactics aside, I think that both France and Italy had fairly aged players though that alone cannot explain the inability to play decently. Whatever the internal divisions in either squad, they did not deserve to play beyond the first three matches. 

iPad Sales Count Reaches 3 Million Units

The consumer electronics industry has certainly entered a new phase with the announcement of release of Apple's iPad machine in 2010. While I do not make guesses about what the ales for individual items may be, I was skeptical for a while that the iPad would sell very well. Apple confirms in this statement that the iPad has sold 3 million individual units in the first eighty days since it was made available for purchase. This is an impressive sales count bearing in mind that the gadget is initially stocked only in US stores.

To have shipped out 3 million units of a gadget that has multiple purposes and which performs functions already available in other devices is an outstanding achievement. I do not study consumer electronics industry very keenly but think that Apple have managed to sell a gadget which is known for its aesthetic value and which I expected to be a niche product. It is far from a niche product now because everyone with US$ 499 to spare seems to be getting one. And the price tag suggests that nobody is buying the gadget just so they may also have one.  

Competition of the E-book Readers

In the last couple of months, its been clear that Apple has made a success of the  iPad and has exerted pressure on Amazon's Kindle and other e-book reading devices. My original thinking was that given the diverse range of capabilities built into the iPad, it would not be a direct competitor for conventional e-book readers. Added to that is the fact that the iPad was more expensive. In my view, I was partly right in my reasoning because the effect of the iPad has been markedly different from was predicted.

It is clearer now that the iPad has indeed altered the market for e-book readers first by intensifying competition between the readers such as the Kindle and the Nook reading devices. in addition, the arrangement with publishers has placed Amazon under pressure in terms of pricing of electronic versions of the books. As the story by Brad stone confirms, the major sellers of conventional readers Amazon and Barnes and Noble are engaged in competition and have reduced prices by large margins. What this implies is that the cost of the products has not only come down much sooner than was anticipated, but also that the e-reader market is getting consolidated around a recognized number of gadgets.

To my mind, this is all for the good and is a lesson to students of price theory generally and competition in particular on how markets work. What remains unresolved is the degree to which the iPad will then compete more directly with these devices. All in all,  the economics of the market for e-book readers is being driven by competition between firms making independent decisions.    

Quoting William Petty

"That which angers men most is to be taxed above their neighbors." Sir William Petty

Its the season for tax returns in the country where I live and I just encountered William Petty's quote. I feel that he speaks for me today.

World Cup 2010: Preliminary Ideas

This blog has few readers but that does not discourage me from recording that this is blog post number 450 in 3.5 years. Besides congratulating myself for telling stories largely to myself, I think that I should try and make comment on something that is more current and undeniably popular.

The largest sports spectacle in the World is at this time being held in the republic of South Africa and the initial facts show that it will be as good as any other. In the five days since, there have been some surprises, a few good matches, drab draws (like Italy vs Paraguay) and some more. So my main comment relates to the performance of the highest rated teams thus far. The defending champions are not known to start strongly but my judgement from watching Italy's first match suggests that the Azzuri is neither as organized nor as imperious as they were in 2006.

Of all the top-rated sides that have played at least a match, England were the most underwhelming in my view. Even putting aside the goalkeeping error that led to the equalizer from Clint Dempsey of the US, I think that not many people were impressed with overall performance of individual players and the whole team. Looking also at the Pool A, it is true that in spite of not winning, South Africa had a decent performance in the match against Mexico for a team regarded as the weakest host nation ever. France too seemed to punch well below its weight in terms of the calibre of players in its squad.

So with five matches played so far, the most impressive squad has been Germany. This is a surprise to many because of the substantial overhaul in the team and the absence of its long-term and dependable skipper, Michael Ballack. The self-assured demolition job against Australia a couple of days ago was impressive and may have upset the odds substantially.

In summary, I still think that there is much to go before firm favorites are confirmed and England may still reclaim its consideration by the quants here as potential champs. However, in spite of its high ranking and expectation of triumph, England does not look like champions in 2010. In all, prediction is difficult but the German teams seems to be well-conditioned and will make it to the next round.

Why Tax Policy is Politics

One of the things that I find useful about the experience of the last recession and accompanying economic crisis is the need to re-examine and distinguish between economics and business policy. The reason for stating this is that many people with a successful business background more often than not assume knowledge and competence in matters of economic policy. In addition, the economics crisis has led me to the more critical distinction between what advise a dispassionate economist may give on the one hand and other issues of policy that involve political choices.  This too is an area in which even economists mistake their political opinion for professional views.

An example of such an area of policy involves taxation generally and the application of appropriate tax rates to capital gains. Economists argue rightly that taxation of capital gains amounts to second-round taxation because these gains arise from income that was already subjected to taxation. Often the happy compromise is to subject capital gains to a lower level of taxation in comparison to other income. Sensible as ever, John Kay illustrates why capital gains is difficult to precisely define and therefore to exempt or to subject to taxation in  a rational and consistent way. His main argument is that maintenance of tax compliance requires that some capital gains taxes be levied. In emphatic terms, he states that the issue is "quite properly the subject for political compromise". This is one point that should be borne in mind as taxation policy is discussed.