1. How Amazon tricks you into thinking it always has the lowest prices.
2. Most neoclassical economists don’t understand most of these. I think not one in fifty actually understands the Heckscher-Ohlin theorem, for instance.
3. In one restaurant in China, beautiful people eat for free.
6. British markets in everything: fish and chips chips.
7. In praise of Piketty’s translator.
Almost any economist who teaches or studies trade understand H-O. It can't be as few as one in fiftty.
Hint: he may have been joking.
oh... I didn't think he was joking because most economists really don't understand H-O because a fairly small percent study trade.
It's one of the most blindingly obvious theories in economics - that countries export what's easiest for them to make and import what's most difficult..
If so obvious, why did it take *both* H and O to figure it out? I still don't think Tyler is joking in part because I've never seen him use sarcasm on this blog. And most economists don't know anything more than basic trade. no way that either Tyler or Akex could teach a 400 level trade course - just isn't their area.
No clue about where Cowen was going with the item or his comment. However, it's probably worth pointing out that for the most part the earlier economists were attempting to explain what was already occurring -- therefore it's not surprising that any insights and theorems, at least ex post, will be "obvious".
The issue I have with a number of the items listed (like Cobb-Douglas) is that some are devoid of what I would call economic content and only serve for dealing with the formal modeling and theorizing of what *should* be happening in an economy rather than sheading light on what *does* occur.
Have you read the theory? Does it seem hard to understand to you?
If Cuba trades with the United States, is a) Cuba likely to export sugar and the US grain, or b) the other way around? If you answered a) congratulations! You fully understand the theory.
H and O didn't figure it out, they just formulated formally something obvious and got their names attached to it. That's why Tyler is making fun of Yglesias for stupidly writing that it's something only neoclassical economists can understand.
Oy this is like trying to explain a knock-knock joke to Mortimer Snerd.
Countries exporting what is easiest for them to make sounds suspiciously like 'absolute advantage'. I agree absolute advantage is blindingly obvious.
One level of sophistication further is comparative advantage where a country exports what it has a comparative advantage in making. Surprisingly, as shown by various surveys, comparative advantage is not blindingly obvious.
The Cuba-US example works well even if only comparative advantage is invoked. In fact, it could perhaps even work on the basis of absolute advantage alone.
H-O goes one step further than comparative advantage by talking about differences in factor endowments (typically, capital and labor but occasionally land and labor) driving trade (the usual assumption being that production processes are identical in both trading partners).
7. "Goldhammer’s ad hoc work as a publicist for Piketty shouldn’t surprise us if we appreciate that any translation above the level of a crib involves a personal connection."
Obviously written by a journalist who doesn't know translation.
Yes, all those contemporary translators of Tolstoy, Flaubert, Kant, Machiavelli, etc probably were unaware that they cannot hope to rise above the level of a crib.
3. That probably happens all over the world, only covertly.
When an article starts with an unsourced passive voice assertion, that is a pretty good signal that it is going to have some big problems. Personally, I've never thought of Amazon as having the lowest prices. I know that when they started, their books and CDs were less expensive than many bookstores, but I don't have any preconceptions that this extends to their other products. Mostly, what Amazon is known for is delivering a wide variety of products to your door in less than 48 hours.
That's my perception. Amazon is one of the places I check for cheap prices, but it's not the only one. It does have a wide variety of products and it delivers quickly.
"X is known for Y" is not (generally) considered passive voice - "known" is acting as an adjective, you could substitute a another adjective like "famous" and it would still make perfect sense.
If the doer of the action is question is not the subject of the sentence, it's the passive voice. What's more, if the doer of the action in question is not identified at all, it's weasel words.
Something something something perfect passive participle something something passive indicative.
My high school Latin teacher would be so proud.
The typical framing of the sneaky retailer says more about our cultural (human) biases than it does about the retailers. The more simple explanation to me would simply be that Amazon notices that consumers who buy the less popular items are less price sensitive, so they concentrate their low-cost advantage on the more popular items.
And the no hassel returns.
Isn't it clear that this is a startup press release disguised as an article-- and getting a bizarre amount of traction?
#2 Funny how they use "neoclassical economists" as a term to imply that these textbook concepts are taken from some niche perspective in the field.
"British markets in everything: fish and chips chips."
British markets in everything: fish and chips CRISPS.
or "fish and fries chips"
But neither of those would have been amusing.
Tyler, could you perhaps elaborate a bit more on #2? For example, who do you count as a neoclassical economist? Everyone with a PhD? Everyone with a MSc? Everyone with a BSc/BA? (in economics I hardly need add). Or perhaps only those who teach at one of the top 50 institutions? Do you take neoclassical to be very broad or very narrow? And what are the common mistakes made by those in the group you count as neoclassical economists? How do you know that many of those you classify as neoclassicals don't understand the HO-theorem? I'd be interested to hear more on this.
Concerning Amazon's pricing, I'm curious about the direction of causality here. The authors state that Amazon prices their most popular products more aggressively since these are the products that influence price perception the most. I don't know if they considered diligently that the products are popular partially as a result of their aggressive/low pricing, ie the whole demand curve business.
#3. "Beautiful people eat for free: restaurant in Zhengzhou determines customers' bill according to how attractive they are ..."
It's a *South Korean* restaurant in China that's using the promotion to sell plastic surgery services... once you get to that part it all makes sense.
The article in the New Republic on Goldhammer, Piketty's translator, is grotesque hype.
Although it is trivial for an anglophone professional translator to translate Piketty into English, that article presents Goldhammer as a genius full of insights because, for example and quite irrelevantly, he realized that Viet Cong defectors might lie to Americans: who would have thought?
He is supposed to be a mathematician but has, as far as I could check, never published anything in a mathematical journal.
Finally and most importantly he can't write correctly in French: in his article [http://www.people.fas.harvard.edu/~agoldham/articles/GaucheUMont3.pdf] one reads "... le meilleur espoir de ce parti est, horribile dictu!, que la crise va de mal en pire, que Sarkozy s’effondre complètement, et que Dominique Strauss-Kahn revient du FMI à temps... "
There are three egregious errors (in one random sentence!) here :"va" instead of "aille", "pire" instead of "pis", and "revient" in place of "revienne".
These mistakes would not be tolerated in a French course for first year students.
-- was the fault of a rushed translator, but then I learned that the translator is a multiple award-winner.
2. MY can be funny when he wants to be. And Cowen can be ironic. At least I hope he's being ironic.
1. If amazon has the lowest prices on the things people actually buy (also known as the most popular products), then it has the lowest prices in practice. The basket of goods that people actually buy (across all platforms not just amazon) is what is relevant for determining amazon's prices. I don't see any trick here.
* That should be for determining whether amazon has high or low prices.
@1. I sometimes think I'm the only one who's noticed that Amazon has intentionally FUBAR'ed its price searching -- the feature is still nominally there, but has been made so cumbersome as to be almost completely worthless. First, if you want to sort by price, you have to pick a single department. Why? Because Amazon's database engine can't handle searches by price across departments (even though it can obviously handle searches by 'relevance' departments)? No, obviously not. But the WORST thing is that when you search for an item by price, is that Amazon intentionally pollutes the results with every conceivably related item possible. Try searching for "32 inch TV". If you leave the 'Sort By' set to relevance, you get exactly what you expect -- a listing of 32" TVs (but starting, of course, with the ones Amazon would most like to sell you). If you switch it to 'Price: Low to High', what do you get? Try it -- you get 400! pages of useless crap, starting with every possible kind of cable that could be connected to a TV. OK, so just jump to, say, page 200 where you figure the TVs might actually start showing up? Nope, can't do that -- you have to start at the first results page and click your way forward. Amazon isn't the only one, though -- eBay, has manged its price search in almost exactly the same way.
Ahh, the price of market price discovery ;-) Did you expect a free lunch?
Re: blockchainiacs, this is sounding like the last desperate straw-grasping of a silicon valley project that already lost its VC money and needs some excuse to ask for more.
It's funny that the blockchain is being touted as the element of bitcoin with all this huge potential. The blockchain is exactly what's killing bitcoin. Distributed blockchain verification aka mining is expensive. The system works by setting some constant mining reward and dividing that up among however many miners want to compete for it. Improved mining efficiency brings in more miners, and doesn't bring any benefit to users.
Look at what's happening with bitcoin. It adjusts mining difficulty every so often towards a target of 150 bitcoins per hour or 3600/day. After the late 2013 price spike, the value of those rewards jumped to more than $2m/day. So investment poured in. A year later, it takes 40 times more computing power to earn a bitcoin than it did a year ago. Meanwhile miners are forced to sell all their bitcoin income to cover costs, so prices are falling. Mining income is down to about $650k/day. And now they're all going bankrupt.
So now we're supposed to somehow take the blockchain and apply it to any kind of message. Why do we need the blockchain for messages? Verifying blockchains costs computing power, so there has to be some reason to do it. Just saying the blockchain "could be extremely useful" doesn't make it so.
2. The "wonks'" obsession with economists is amusing. DSGE models, for example, are not understood by many economists, and the way Yglesias typically writes about them I would guess that he doesn't have a great grasp either. They are a fairly specialized tool even within the profession. So why do a post like this? It's important to remember that these guys aren't writing for economists. They are writing for regular people, but they want to LOOK like they are insiders to the econ field. They aren't, and that's ok, but I always find it odd that guys like Yglesias feel comfortable opining on things so far outside their wheelhouse.
That brings up an important point: what is Yglesias' wheelhouse,exactly?
I suppose clickbait and red meat.
#6 What do you expect? After all they also invented the 'bread' sandwich, i.e. two pieces of bread with bread filling.
Amazon isn't always the cheapest? Well, no, of course not. Neither is Wal-Mart.
Both retailers offer a bundle of competitive prices combined with convenience, and who would reasonably expect anything else?
It would be more interesting to explore how and why Wal-Mart prices vary from store to store and region to region, and the extent to which Amazon offers different prices to different customers, based on what Amazon knows about that customer's shopping history.