The world price of oil has now declined to under $50US a barrel, a third of it’s peak value (live prices here).
This takes me back to a post we did at the end of May – when fuel costs were pushing up at a rate of knots. The topic was covered in the name: Collusion, multiple equilibrium, and petrol prices.
In its eternal quest to “not be evil” Google has decided to take on one of the banes of man – himself, and his time-inconsistency.
It is doing this by introducing a new service to gmail. You can set up this service to significantly increase the transaction cost associated with sending an email when you are drunk!
In the “drunk” state you may think it is a good idea to email your ex girlfriend/boyfriend and say strange things – however, prior to being drunk you may decide that any benefit associated with emailing someone in your drunk state is more than canceled out by the embarrassing phone call the next day.
This feature allows you to increase the cost to writing the email in your drunk state – allowing you to “pre-commit” to not sending embarrassing emails.
With classy features like this you can tell that a genius like Hal Varian is working for them 😉
Today National released their corrections policy, which would allow the private sector to tender for the management of prisons.
Although not a completely ‘new’ concept for New Zealand (Auckland Central Remand Prison was privately run under the last National Government) it nonetheless raises the issue of when is it appropriate for such services to be ‘contracted out’ rather than provided ‘in-house’ by the government.
Hart, Schleifer and Vishny’s “The Proper Scope of Government: Theory and Application to Prisons” asks the question when should a government provide a service in-house, and when should it contract out provision? (Anyone interested in the full article may be able to locate it here).
The authors’ develop a model for asset ownership (in this instance a prison), which can be owned by the private sector, who contract back to the government, or alternatively can be owned outright by the government.
The central finding of the paper is that the private sector has relatively stronger, but seemingly contradictory, incentives to both reduce costs (driven by a profit motive, which comes at the expense of quality) and increase quality (to get a higher price from the government, who is an ongoing buyer of the service). In this instance the quality of a prison entails order in the prison, amenities that prisoners receive and rehabilitation.
Read more
For those of you don’t read stuff.co.nz while they should be working, there are some really interesting tidbits on the latest article about the Warehouse pahsing out the extra concept.
It expected an annualised pre-tax improvement in trading earnings of about $9 million.
i.e. the extra concept has been hemorrhaging money!
Mr Morrice said it was the failure of the hoped-for halo effect – where grocery shoppers also bought general merchandise – that was the main reason for Extra’s dumping.
This has been Matt’s pet topic during this saga (posts here and here). The killer for the halo effect, and the reason why I’ve always believed the Extra concept would fail unless a supermarket owned the warehouse is summed up nicely by Tony Carter from Foodstuffs
“Clearly they did not have the scale”
and Mary Smith of Auckland
“I don’t come here that often. I find their prices expensive compared to the other supermarkets.”
Agnitio
ISCR have just launched New Zealand’s first prediction market.
Who’s going to be the next Prime Minister – Helen or John? Will the price of petrol be $3 a litre by Christmas? Will Winston be sacked before election day?
These are some of the questions Kiwis may find themselves backing their opinions on with iPredict – www.iPredict.co.nz – New Zealand’s first real money online prediction market, which launches tomorrow (9 September).
The online marketplace enables users to trade on their predictions on a broad range of future political and business events that pay real money if their prediction comes true.
Established as a research tool by Victoria University of Wellington and think tank ISCR, iPredict harnesses the wisdom of crowds via the Internet to predict future outcomes and has a strong focus on helping companies, government agencies and academics with research. …
Mr Burgess says that iPredict is like a simple stock exchange, trading real money.
“How it works is that contracts pay $1 if an event comes true – nothing otherwise – and the price these contracts trade for is the prediction. For example, you could have a contract that pays $1 if Helen Clark is the next Prime Minister, and pays nothing otherwise. If that contract trades for 60 cents, then the market’s prediction is a 60% probability that Helen Clark will stay on as Prime Minister.”
Mr Burgess says that prediction markets are the gold standard for forecasting.
“Traders on prediction markets combine information from polls, expert commentary and any other source to produce a prediction that is more accurate than any available alternative,” Mr Burgess says.
“Prediction markets work because they ask traders to put their money where their mouths are, so it pays to be honest, objective, and even do a little homework.” …
Anybody can browse iPredict and see the predictions for free by going to www.iPredict.co.nz but traders have to be 18 years and older to set up an account. Accounts are free to set up and people can start trading with as little as $5.
Get some money on your account and get predicting.
Goonix
I’m always confused when I hear the economists are against strikes. After all, it is perfectly sensible to place strikes in the bargaining relationship between employees and employers.
I think the confusion stems from the fact that many economists also say that there is a definite limit to strike action – as if it is set up by a significantly powerful union it merely represents the action of a monopoly against a weaker consumer (in this case the firm). As we know that market power leads to suboptimal outcomes, the case of a strong union and a weak firm will lead to a suboptimal outcome – namely too little production, because too much of the surplus is extracted by the seller (labour).
However, this does not imply that economists are completely against the option of striking being available.