The Hidden Side of Everything

Here are some of the issues we covered towards the end of class (29/09) exploring how economic can provide insights to everyday settings that can go against the conventional wisdom.

The five issues we raised in class were

1. Is the destruction by a vandal in throwing a brick through a window good for the economy?
2. Can consumers benefit if hotels increase their rates by over €100 per night in the run up to major event?
3. Why do shops use 99 cent pricing?
4. Why has the recent craze in reality TV caused the price of old syndicated sitcoms to soar?
5. Why does modern advertising contain so little information?

We provided answers to most of these in class.  The readings associated with these are all available in section 1D on Blackboard.  The associated readings are listed below the fold by corresponding number.

1. Hazlitt, Henry. (1946). Chapter 1: The Lesson and Chapter 2: The Broken Window from Economics in One Lesson.
2. Farrell, Chris (1999) We’re All Economists from Economic Literacy Symposium: An Overview of the Issue.
3. Landsburg, Steven. (1993). Chapter 2: Rational Riddles: Why The Rolling Stones Sell Out, from The Armchair Economist: Economics and Everyday Life. 
4. Caplan, Brian. (2005). General Equilibrium: The Reality Series. Taken from Econlog on the website of The Library of Economics and Liberty.
5. Kay, John. (2005). Why Does Advertising Contain So Little Information? from Everlasting Lightbulbs: How Economics Illuminates the World. Also see page 4 of Landsburg from #3 above.

All of these readings are very short and can be read in a few minutes.  The Farrell reading, We’re All Economists, is actually posted to section 1C: Economic Literacy on Blackboard.  Only the start of the piece is relevant.  The Landsburg reading contains a number of other interesting issues.

The past few years has seen an explosion of pop-economics books: books that apply economic concepts to everyday life and are targetted at the general reader rather than the trained economists.  Some of these issues have appeared on some recent exam papers.  These include

• Is there a link between legalising abortion and a drop in crime?
• Do estate agents get a higher price when they sell houses they actually own?
• Why does a coffee which costs less than €1 euro to make retail for in excess of  €3?

The two readings you should look at for these issues are excerpts from two recent books.  The first is from American authors Steven Levitt (the economist) and Stephen Dubner (the journalist).  The second is by UK author (and economist) Tim Harford.  Both are available to print from Blackboard in section 1D.  I don’t have a soft copy of the third reading below but it is well worth finding.  Regardless I would recommend that you have a look at the Levitt and Harford readings as we begin to explore what it is that economists can tell us (and how it’s not limited to the inane babble of the talking heads on Bloomberg television).

• Levitt, Steven. (2005). Introduction: The Hidden Side of Everything, from Freakonomics: A Rogue Economist Explains the Hidden Side of Everything.
• Harford, Tim. (2006). Introduction and Chapter 1: Who Pays for Your Coffee, from The Undercover Economist
• Coyle, Diane. (2004). Introduction: Why Economics Trumps Common Sense, from Sex, Drugs and Economics: An Unconventional Introduction to Economics