The law of unintended circumstances–Danish Fat Tax

I quote

Denmark's recently introduced tax on food and drinks is driving shoppers to neighbouring Germany at an unprecedented level, according to a survey by the Danish Grocers’ Trade Organisation (DSK).

The survey shows that 60% of Danish households have bought beer or soft drinks in Germany within the past year. Only four years ago, 60% of the households said in the same survey that they “never” traded at the German border.

A large amount of the beer, which is bought in Germany, actually comes from Denmark. Last year Danish breweries exported 1.2 billion units to the German border shops. In 2011, Danish families on average bought 420 units of beer or soda in the German border shops, and the number is rising.

“This [the rise in the border trade] is due to the tax increases on specific consumer goods which where introduced by the Danish government at the start of the year. This is what we see the effects of now,” Claus Bøgelund Nielsen, vice president at DSK, told EurActiv.

On 1 January, the Danish government introduced higher taxes on beer, wine, chocolate, candy, sodas, ice, cream, coffee, tea and light bulbs. The government also raised the tax on tobacco starting in April.

Pretty much I TOLD YOU SO.

The link between fish and climate change

HSBC released a report on climate change. I quote the summary

This past week, two publications highlighted the effect of carbon dioxide (CO2) and climate change on oceans and marine life. We believe the related consequences for Asian economies will serve to increase pressure on governments to reduce emissions.
CSIRO published its 2012 report card on Marine Climate Change in Australia and Nature Climate Change a paper which called on adaptation strategies for ocean conservation. Oceans absorb around one-quarter of all the CO2 that we emit resulting in rising surface acidity levels, which in turn affect marine life. Moreover, the consequences of CO2 also include warmer water (oxygen depletion) for certain fish, as well as changing currents, which drive fish towards cooler waters. We think the pressure on governments to curb emissions will only rise as the impact of CO2 on oceans becomes more recognised.
Globally, the production and consumption of fish and aquaculture have been rising (Chart 1) and this sector sustains the livelihoods of around 10% of the global population. Ocean acidification coupled with warming water - both consequences of CO2 emissions -disrupt marine life, impacting livelihoods and economies. Asian economies are most exposed to the fisheries and aquaculture sector, as Asia accounts for the top six producers of aquaculture (Chart 2) and 87% of all persons employed in the sector globally.
Fish provide 15-20% of animal protein for around half of the world's population. As marine life is disrupted by, amongst many factors, CO2 emissions, diets may turn to more meat for appropriate protein intake. Recent data from Japan shows that the consumption of meat and fish has been converging (Chart 3), suggesting that less fish means more meat. This switch has the potential to further exacerbate existing water scarcity problems in many Asian countries since meat requires more water to produce. In our view, the pressure on Asian governments to reduce emissions is only going to grow.

I guess the countries who have a well organised aqua culture and export industry will do something about it, but for countries where there is no organisation such as India, it wouldn't matter. Unlike pretty much most countries who have recognised the issue of climate change, need for sustainability and carbon capture, India is blissfully proceeding down the track of severe environmental degradation. And the fault directly lies with the citizenry second and the government first.

Are We a Democracy?

Dear son

Here is an interesting way to evaluate democracies based upon an ancient Greek measure first drawn up by Plato. 

While there have been instances of democratic thought earlier than the ancient Greeks, the western and modern civilisation's basis of liberal democracy is heavily based upon Greek, roman and then European enlightenment. 

I don't like governments mainly because of the constraints it brings but I'm also cognisant of the fact that states require governance. Some element is always required. 

But our societies are getting complicated and complicated. It is a far cry from the Athenian days that all voters (only males with property please) could get together and then vote on all matters. 

The trick is to recognise the sea you are swimming in without losing yourself in it son. You cannot avoid the political parties, the encroachment of the state into the private sphere etc etc but be aware of what's happening. 

So for example, the current government is putting in place policies at this moment which is pretty much going to define whether or not you get a job in 6 years time. Do you see why you need to think about what this government does, which your father and mother helped vote in? 

So son, read the newspaper every day. The best defence against tyranny and overbearing government is a well informed citizenry. 

Love

Baba

Are We a Democracy? - NYTimes.com
http://opinionator.blogs.nytimes.com/2011/11/09/are-we-a-democracy/

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The Stone is featuring occasional posts by Gary Gutting, a professor of philosophy at the University of Notre Dame, that apply critical thinking to information and events that have appeared in the news.

Americans strongly support democracy both at home and abroad.  But we are ambivalent about referendums (often in California, recently in Mississippi and in Greece), which put major decisions to the people as a whole.  We don’t fully trust “the people” to make legislative decisions.   Those who remember their civics classes will note that we have not a direct but a representative democracy (or a republic).  But many Americans don’t think we are really “represented” by the people we elect, and, recently, the suspicion has grown that we in fact live in a plutocracy — a nation governed by the wealthy.  But there are clearly also other elements that exercise  political power over us.

Plato, in his still provocative “Republic,” proposed that there are five types of government: aristocracy (rule by the “best”, that is, by experts specially trained at governance), timarchy (rule by those guided by their courage and sense of honor), oligarchy (rule by a wealthy minority), democracy (rule by the people as a whole—a “mob” as Plato saw it), and tyranny (rule by a despot answerable to no one but himself).  Plato’s categorization is a good starting point for thinking about the nature of our government.  Although we don’t fit precisely any one of these type, each seems to express an element of our political system.

Why Your Children Probably Aren’t Going to be Murdered

Son

You would have realised by now that the way we treat you is different from your friends, like with respect to safety. You are allowed out late, riding bikes and and and from a very young age while your friends were cosseted. That's because we feel that it's important of you to learn how to look after yourself and gain confidence. Take risks son, have fun. 

But this article is interesting due to the numbers cognitive bias issue. Fascinating study. 

Love

Baba

The Availability Heuristic: Why Your Children Probably Aren’t Going to be Murdered | Why We Reason
http://whywereason.wordpress.com/2011/11/12/the-availability-heuristic-why-your-children-probably-arent-going-to-be-murdered/

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The Availability Heuristic: Why Your Children Probably Aren’t Going to be Murdered

by sammcnerney on November 12, 2011

Journalist Lenore Skenazy is called a number of things: “Americans Worst Mom,” “A Heretic,” and, “Abusive.” Her crime? In 2008 she left her nine-year-old son go home by himself on the New York Subway. Her son’s solo trip was made famous by a New York Sun column written by Skenazy and it’s almost too easy to imagine her critics: up-tight mothers so overly protective of their children that they wouldn’t even think of letting them wait at the bus stop alone. You know, helicopter parents. As one recent Time.com article describes, they are the type of parents who “[buy] macrobiotic cupcakes and hypoallergenic socks, [hire] tutors to correct a 5-year-old’s “pencil-holding deficiency,”… [and demand that] nursery schools offer mandarin.”

Can you really criticize overprotective parents?  They are, after all, only trying to ensure the safety of their children. But sometimes the numbers tell a different story. In regard to Skenazy’s “abusive” decision, consider that only about 100 people are abducted by a stranger every year, half of whom are eventually murdered. Factoring in that there are 50 million children in the United States, the annual homicide rate via abduction comes out to be one in a million. In other words, “if you wanted your child to be kidnapped and held overnight by a stranger, you’d have to leave the child outside and unattended for 750,000 years.” Similarly, consider that, “more than twice as many children are hit by cars driven by parents taking their children to school as by other kinds of traffic.” That is, every time a parent drives their children to school the chances that a child gets killed increases.

Unfortunately, the parents don’t usually buy these types of arguments; “those are just the numbers,” they might say, “they miss a larger point: don’t rely on statistics when it comes to your children’s safety.”

Why Do People Eat Too Much?

Now this is an interesting study although I'm not so sure that I agree with the conclusion fully. 

Yes the portion sizes are important for status but not just that. Companies find that giving more for the same price is a good signalling mechanism to get more customers. That's not driven by status but the human tendency to like bargains. 

Still one to think about for myself. Smaller portions with more control over junk food and more exercise! 

Love

Baba

Why Do People Eat Too Much? | Wired Science | Wired.com
http://www.wired.com/wiredscience/2011/11/why-do-people-eat-too-much/

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“It seems to me that our three basic needs, for food and security and love, are so mixed and mingled and entwined that we cannot straightly think of one without the others.”
- M.F.K. Fisher

Human beings are notoriously terrible at knowing when we’re no longer hungry. Instead of listening to our stomach – a very stretchy container – we rely on all sorts of external cues, from the circumference of the dinner plate to the dining habits of those around us. If the serving size is twice as large (and American serving sizes have grown 40 percent in the last 25 years), we’ll still polish it off. And then we’ll go have dessert.

Consider a clever study done by Brian Wansink, a professor of marketing at Cornell. He used a bottomless bowl of soup – there was a secret tube that kept on refilling the bowl with soup from below – to demonstrate that how much people eat is largely dependent on how much you give them. The group with the bottomless bowl ended up consuming nearly 70 percent more than the group with normal bowls. What’s worse, nobody even noticed that they’d just slurped far more soup than normal.

 

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Knowing and Making: Does Nudge require regulators to be "more rational" than consumers?

Dear son

This whole idea of nudge policy making relates to the idea that people would be more able to change behaviour if they are given a slight nudge rather than a shove or given black and white rules. 

It's a bit weak in its argument. In any case it takes time for nudging to take shape. For example, for long term unemployed, it's better to make work more attractive and welfare more painful so that they get off their butts and look for work. The shove idea would be to stop welfare after 2 years. 

But the underlying idea is that the regulators, the bureaucrats, the politicians are rational, completely altruistic and are driven by solely an idea of human well being and happiness. I can just see you chuckle and laugh. 

Lets assume the reserve situation, we know the top guys are anything but the above. So how would you, as a citizen, go about nudging them to be altruistic and good? See the difficulty in this?

So I'm afraid I'm not that enamoured with this nudge theory. It's a fad if you ask me. But laws of economics are iron, man is driven by incentives. Learn that and you will know how to manage people and understand why people behave the way they do. 

Love

Baba

Knowing and Making: Does Nudge require regulators to be "more rational" than consumers?
http://www.knowingandmaking.com/2011/11/does-nudge-require-regulators-to-be.html

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Knowing and Making

A blog about cognitive and behavioural economics. Building mathematical models of how psychology influences economic systems.

Tuesday, 8 November 2011

Does Nudge require regulators to be "more rational" than consumers?

A couple of times recently - notably in Bill Easterly's otherwise very positive review of Daniel Kahneman's new book - I've seen the following common critique of Nudge-style approaches: "But if people are irrational, regulators are irrational too - so how can they make rules to counter citizens' irrationality?" Easterly says:
But [the case for libertarian paternalism] is much too sweeping, because it overlooks everything the rest of the book says about how the experts are as prone to cognitive biases as the rest of us. Those at the top will be overly confident in their ability to predict the system-wide effects of paternalistic policy-making...While it's right for regulators to be humble about their degree of knowledge about the world, and to be cautious in creating new regulations, there are several reasons why this particular criticism is wrong.
First, we are not comparing like with like. There is no claim that a regulator, when placed in the same situation and making the same decision as a citizen, will come up with a better answer. Instead, we are looking at times when citizens make snap decisions without thinking them through - or, often, make no overt decision at all because they do not notice that there is a decision to be made. In these cases, the regulator's goal is either to say "what would the citizen decide if they did think about it carefully?", or even better, to encourage the citizen to make the effort of thinking it through themselves. If the answer to "what would the citizen decide?" is controversial or ambiguous, the regulator is unlikely to try to intervene.
Second, everyone specialises in something. A lawyer specialises in the law - I wouldn't expect them to be better at making business decisions than me, but where my business decisions have legal ramifications I'd like to have their input. A doctor does not know better than me what I should choose to eat for dinner, but they can give me useful information to help me pick the foods that are right for me. And similarly, somebody who spends their professional life thinking about decision-making and examining the extensive research in this field is likely to be able to help me make decisions that I'll be happier with.
Third, even if regulators are not perfect, a best-effort regulation may well be better than none at all. The absence of regulation does not mean the absence of nudging. As Thaler and Sunstein point out in Nudge, our decisions are going to be influenced by context, framing and defaults no matter what. If the government takes no part, then the influences will be random, or chosen by private companies (whose interests are sometimes opposed to mine, though not always). If a democratically accountable government can help to move from one default frame to another that is more likely to be in my interest, then why would I not prefer that one?
There are people who read public choice theory as implying that most government policies are likely to be corrupt and wrong-headed. These people may well oppose Nudge-style regulations as they oppose most other regulations. But I think that view is not a mainstream one.
Indeed, mainstream economics has a clear place for regulations - where the action of a private party imposes an unpriced cost or "externality" on others, an appropriate regulation will actually make the market function more like a genuine free market, not less. One could argue that the framing carried out by private companies acts as an externality by imposing hidden costs on the consumer - in which case a better market outcome will be achieved by reversing these frames.
Finally, Nudge policies are designed to be optional. Anyone who does not trust government to provide a default which is in her own interest is welcome to ignore the government's recommendation and make her own choice. Those who would prefer to make the tradeoff of trusting the government's (carefully researched, democratically supervised) recommendations can simply take the default and save themselves the effort of thinking it through, and reduce their risk of making a mistake.
Easterly certainly raises an interesting challenge for behavioural research: the "system-wide effects of paternalistic policy-making" are indeed not well-understood. The fact that the policies are optional for the citizen is (I suspect) likely to mean that the system exhibits stability rather than instability, with any effects of Nudge regulations being damped rather than amplified by the interactions of the system. But it's not certain yet. My own research focuses partly on this area, as I think it's important to find out how a more accurate picture of human behaviour, scaled up to the systemic level, will affect our understanding of how markets work.
I notice that I have written on this subject before, so I'll finish by quoting myself:
We don't expect aeronautical engineers to be immune from the law of gravity. Yet we still trust them to design planes that can help us transcend our own gravitational problems. at 00:44

National pay for teachers 'undermining school standards'

Now here’s something that is guaranteed to get people all excited.

Researchers warned that imposing fixed salary levels across the country led to serious staff vacancies and underperformance in more affluent areas where private sector pay was higher.

It was claimed that national pay in state schools – a system fiercely protected by teaching unions – resulted in an average drop of one GCSE grade per pupil as schools struggled to recruit and retain good teachers.

Pupils in areas such as the Home Counties and leafy suburbs surrounding major cities such as Manchester and Birmingham were most likely to be hit, researchers warned.

Prof Carol Propper, from Bristol University’s Centre for Market and Public Organisation, which published the study, said the findings presented “strong evidence” that national salary scales had a “negative impact on pupils’ learning”.

In my view, one of the reasons why the north of England or even Scotland under-performs the south east and London is because the economy is frankly overpriced over there as one reason. When the costs are so high, why would anybody move up there to setup jobs? And once you spread this reason around, you will see why things like education is challenging.

When you run out of money, you can do this

When you run out of money, your bank card is useless, no? not really, see what you can do with bank cards

Reading about the Buddha made my hair hurt

If the Buddha has become enlightened and gotten off the wheel of life as we know it, then from a metaphysical perspective, he is no longer in this Newtonian universe. I'm happy to consider, in terms of faith and metaphysics to consider the soul to be made up of an energy form which is yet to be determined.
Which begs the question, he is obviously somewhere else, in terms of the laws of preservation of mass and energy. That somewhere else is a universe which is outside our universe, operating on physical principles which we do not know or operate. the barrier or boundary between these two universes is also unclear or unknown.
But based upon faith, praying to Buddha helps in improving your lot in life in this world or even in your next life here. Which means that the Buddha is able to reach back from the other universe to this and influence people and matter in this universe.
But if he has passed off the wheel of life, why is he still coming back?

Beyond Food

I was invited to a dinner at a great restaurant near London Bridge by my alma mater to talk about the economy and stuff with other alumni and associated academic greats. The food was great and I, as usual, poked people after listening to some serious pap about how bankers ruined their lives. HA!, but that’s not what I wanted to talk about. I want to talk about the restaurant itself.

Its hosted by the Beyond Food Foundation. And it is a great and simple idea. I quote

Our mission at the Beyond Food Foundation is to inspire people who are at risk of or have experienced homelessness to gain meaningful employment.

We run two programmes to do this; Freshlife and United Kitchen Apprenticeship. Both of these programmes use food as a catalyst to build relationships, talk openly, and support and challenge individuals through their development. Our holistic approach ensures that we fully support everyone we work with and gives them the best chance at success.

To us, meaningful employment is emotionally, economically and intellectually fulfilling to the individual, as well as beneficial to the society we live in.

Here are some of the alumni







It really inspired me. What a great idea, eh?