Economics of Blog Traffic

Freakonomics points out a new paper on the relationship between blogging and a blogger's activity in the community:
A new study analyzes reciprocal attention in blogging. The authors conclude that “the activity of bloggers is found to be related to the size and level of reciprocity within a blogger’s network.” The study also finds that bloggers who don’t participate in reciprocity are punished with a lower number of readers. In other words, the Internet hasn’t remotely damaged the arts of logrolling and mutual back-scratching.
While I think the conclusion is probably true and that it is useful to branch out in the blogging community, it's worth considering the methodology of this analysis. The authors analyzed a dataset provided by LiveJournal; and as any blogger knows, LiveJournal isn't exactly the place where any established or aspiring to be established bloggers are hanging out..

Reforming Newspapers

In light of another devastating collapse in circulation at just about every major American newspaper, it seems like their ultimate death is becoming inevitable. Just about everyone one of these major papers has made significant cutbacks in some way, but they all maintain all of the features of a full newspaper: national and international coverage, local news, sports, weather, op-ed, etc.

Twenty years ago, it made sense for every newspaper to offer this kind of full coverage. It was the only way for someone in, say, Detroit to get coverage of the happenings in Washington; or for a person in Dallas to find out what was going on in Russia. Access to competing newspapers was limited to libraries and wire stories were only available in the newspapers that picked them up. The internet didn't exist. Even in the early days of the internet, most content was locked up and available to subscribers only. It wasn't until recent years that the walls around news access came crashing down.

Even though newspapers themselves are covering less than ever, news itself is also more accessible than ever. Wires, international sources and blogs that were inaccessible a few years ago are now available with only a few clicks. The number of newspapers will inevitably continue shrinking, the amount of available news probably won't.

Two topics that still have hope of drawing readers are local news and sports. The very nature of local news makes it a niche that a local paper can best provide. Professional sports is covered by national media outlets, but some of the best coverage still comes from local sources. High school and college sports are popular but rely on local media for their coverage.

Yes, it's sad to see that this is what we have come to. But if newspapers make some radical changes now, they might be able to salvage something. Resources can be focused away from redundant national and international coverage and shifted to local news. I don't know that it will work and I haven't crunched any numbers, but it's probably worth considering risking your life to patch a damaged boat when you still have the chance rather than slowly ride a sinking ship to the bottom of the sea.

Why Rush Hour Exists

In the debate over congestion pricing, an idea that gets thrown around is that for twenty hours a day, most of America's roads and highways aren't even close to their capacity. The rest of the time they are overwhelmed with vehicles. Therefore, we can improve the efficiency of roads and highways by spacing travel throughout the day; and one way to do that is provide an incentive to travel at non-peak times. I'll admit, it sounds great in theory; but it overlooks a few key reasons why rush hour exists at all.

Employees working at the same place and at the same time is good for business. Putting people in the same office for the same forty hours per week makes it easy to organize meetings and to collaborate on projects. Working the same hours as other companies makes it easy to interact with clients and suppliers. If everyone got to pick which forty hours per week they got to work, productivity could take a hit.

Workers, not employers, bear the cost of long commutes. Typically, a work day starts when an employee sits down at his/her desk, not when they leave their garage. If a person spends an hour each way commuting to and from the office, that's ten hours of time out of their week, not the company's. Having employees commute to and from work during rush hours allows companies to reap the benefits of a uniform work day without bearing many of the costs. Yes, there are some companies that reimburse employees for travel expenses, and yes, there are some companies that make deliveries and travel to visit clients; but for the most part, the commute is up to the employee.

Telecommuting is overrated. But it suggests a value of living close to work. The dream job often seems to be the one where you get to work from home. You can wake up and stumble into the "office" in a matter of minutes.. You can take naps during the workday.. You get the comfort of working on your own couch.. It sounds great, and there are plenty of white-collar workers who argue, "there is barely any work I do that I need to go to an office for." Even so, working at home is psychologically demanding. It gets lonely.. It becomes hard to separate home from work.. The comfort of your own couch and ability to nap during the day might just be too tempting. Some people get to work from home a few days per month and think it's the greatest thing in the world - I wouldn't doubt it. But something that is great every in a while isn't something that would be great all the time. Despite the idealism of telecommuting, it seems to suggest that people do value living close to work.

Congestion pricing already exists. If you assign value to people's time, then an incentive already exists to travel during non-peak times. Maybe people don't assign much value to their time? Maybe they are willing to pay the price for congestion as long as the price is in time, not cash. People who have the flexibility to travel at any time of the day are likely already taking advantage of non-peak times.

In the congestion pricing debate, I hope we see more discussion about why rush hour exists. We can charge more money to use roads and highways during peak hours, but that doesn't mean it will change the way that businesses operate. Perhaps congestion pricing schemes might give people a reason to live closer to work - and that's well and good; but even if congestion is decreased during the rush hours, we shouldn't expect it to necessarily spread out throughout the rest of the day, either.
Two and a half years ago I donated a modest amount of money to an environmental charity. I don't have much income, I have student debt, and I'm not using any charitable donations as a tax write-off. Over the last few years, the value of the letters, pamphlets, pens, address labels and other freebies that this charity has sent me has exceeded the value of my original donation. I can't help but feel the money I donated just got used to ask me for more donations; it didn't go to help the environment at all!

Look, I understand that big donors appreciate gifts and that if charities remind them to donate again they will. But the little donors are the ones who give simply because they believe in the cause and want to do what they can to help. If charities think they can raise additional revenue by sending marketing materials to their big donors, that's fine. I hope that they realize, however, that the same marketing strategy only makes little donors like me feel jaded and cynical.

Transit Credit Cards

Last week GOOD had an interesting proposal for universal transit cards. I think it's a excellent idea. I also think it can be taken a step further: transit credit cards.

I haven't worked out the details, but the system would look something like this: a consortium of transit agencies would partner with a major bank to create a credit card that doubles as an a transit pass. The card would be embedded with an RFID chip that could be used to pay fares on trains, buses, etc. Or fareboxes could be modified to allow these new cards to be swiped. Unlike existing transit cards, which use a debit system to deduct from a prepaid balance, the new cards would charge the fare to the rider's line of credit, and the balance would be paid just like any other credit card. Further, these cards would offer free transit rides as "bonus awards" for all purchases, whether on transit or elsewhere.

The user would benefit in two ways. First, the ability to pay for transit services with credit is time the rider doesn't need to spend reloading farecards, buying tickets or fumbling with cash. Second, the "bonus awards" would be a small (but nice) reward for using transit services and would encourage even more use.

Any time transit becomes more convenient for the user, transit agencies benefit from increased ridership. Plus, these cards might present a golden opportunity for transit agencies to raise revenue - something that most struggling agencies could certainly take advantage of right now. Airlines have been using this strategy for years. A report from IdeaWorks indicates that major airlines have made hundreds of millions from the frequent flyer reward cards. Frontier Airlines, a smaller carrier, receives over $40 million annually from it's co-branded credit card. It probably isn't reasonable to expect a transit credit card to generate nearly the same level of revenue as the well-established airline cards, but even a fraction of the revenue the airlines earn could go a long way in improving the daunting financial situation of many transit agencies.

Under the current debit-based system, transit agencies have little incentive to cooperate on a universal farecard. If I buy a farecard from Agency A and Agency B allows me to use it on their system, then Agency B needs to go back and get a refund from Agency A or else lose out on some revenue. The process is messy and bureaucratic. One solution would be to merge the two agencies into one. This makes sense if one is an urban transit agency and the other is suburban, but it hardly works for agencies in different cities. Another solution would be to create a centralized transit agency that collects all the revenue from prepaid cards and distributes it to member agencies based on wherever the transit card is used. The political challenges this type of system faces could doom it to failure from the beginning.

Under a credit-based system, however, these concerns are minimized. When someone swipes a transit credit card, the transit agency gets paid by the card-issuing bank. Agency A and Agency B both receive revenue and there will be no need to go back and figure out how prepaid fares should be distributed. The card-issuing bank essentially acts as the centralized agency that (under a debit-based universal transit card) would need to be established.

If enough transit agencies get on board, it could create an economy-of-scale that would benefit all parties involved as it grows. It would help reduce volatility in funding. For example, last summer, transit ridership was up but revenue (often derived from a local sales tax) was down. With a transit credit card, revenue grows as ridership grows. The additional revenue could also help prevent fare hikes, stop service cutbacks, and it would give conservatives fewer opportunities to chastise transit for being a major welfare recipient. It won't happen overnight, but it could go a long way in improving transit in America.

High School Economics

In light of the economic crisis, the NY Times posted a quiz consisting of 18 multiple choice questions from past AP Econ exams. I scored a 17/18, which wasn't bad considering my distaste for multiple choice exams. I'd be curious to see some of the statistics from this quiz (which questions the most people got right and wrong, the mean score, etc.). Considering the results from Pew's News IQ quizzes, I wouldn't be surprised to find out the mean score is less than 8/16. Nevertheless, it probably won't stop anyone from having an opinion on the economic crisis.
GOOD links to this video of Danny MacAskill tooling around Edinburgh on his bike. This truly is some awesome riding.

After my bicycling disaster last summer, I don't think I'll be trying any of this anytime soon.

Unanswered EV Questions

Shai Agassi has a pretty interesting idea for a new personal transportation infrastructure.

Agassi sees his proposal as a solution to two problems: dangerous CO2 emissions and expensive and volatile imported oil. Here is the problem: Agassi makes no reference to the problems that subsidized vehicles and under priced fuel have caused in this country, notably traffic, congestion, sprawl. In fact, if his program is a success and it manages to decrease the cost of vehicle ownership we risk exacerbating these problems. Agassi talks about declining price per mile driven as some sort of god-send. He ignores the fact that the already low marginal cost of driving is a tragedy of the commons that ultimately leaves everyone worse off.

Now, could we combine Agassi's proposal with policy like smart tolls, congestion pricing or a federal VMT tax? Theoretically, sure. But it seems as though he doesn't mention such policies because he sees the current environment of congestion and sprawl as ideal, and any big idea to preserve it as a good one.

Fear of Taxes

I recently had a discussion with someone who believes taxes on super-jackpot lottery winnings are too high. It would seem, to a lottery winner, that a windfall is a windfall. If he's currently making $40,000 a year, whether the jackpot is $4 million or $40 million, the lotto winner is still substantially and immediately better off. Of course my acquaintance had a simple answer: "I don't care if I win $4 million or $40 million, I want to keep it all".

The assumption here, of course, is that eventually he will win.

Economists have long joked that the lottery is merely a tax on stupidity. The expected value of buying a lotto ticket is almost always negative. Now, there are those few times every few years when the jackpot becomes so lucrative that the expected value turns positive. Even I have been known to spend five bucks on tickets during these rare occurrences. But here is the thing... just because you're getting a good value for your money doesn't improve you chances of winning; they are still as terrible as ever.

So in light of today's "tea-parties" and protests of "excessive taxation" I couldn't help but think about an anecdote that Robert Frank writes in his book Richistan:
The trickle down in spending [by the wealthy] has been accompanied by a trickle down in aspirations. With so much wealth parading around, the middle class and even upper middle class suddenly feel poor by comparison and are spending beyond their means to try to keep pace... the nation's nonrich are wasting their time and money trying to keep up with the wealthy.
When you look at the video clips of people at these "tea parties," notice how many are just average, middle class folks. I'd be more than willing to bet that if you went out there and suggested that we increase tax rates on the ultra-wealthy they would vehemently oppose the idea, even if their lifestyle would be wholly unaffected.

Essentially, there are three reasons to oppose taxes on the ultra wealthy:
  1. You are already ultra-wealthy and don't want to pay higher taxes.
  2. You believe the ultra-wealthy drive economic growth, that wealth trickles down and that higher taxes would hinder innovation.
  3. You think you too will one day become ultra-wealthy, and when you do (like the lotto winner) you'll want to keep every penny.
The first two reasons are pretty rational, but the third... the third reason is interesting. The story of the person who comes from nothing and became a wild success is a typical "only in America" tale. Unfortunately, these stories are extraordinary because they are a lot more rare than they are common. The ironic twist is that middle-class Americans, in an attempt to improve life for their future rich selves, might actually be making themselves worse off. Again from Frank's book Richistan:
The race to make more money to keep up with the rich, [economist Robert H. Frank] says, is the reason Americans are spending less time with children and less time sleeping. It's also the reason Americans feel less happy, since happiness is partly determined by how well we're doing compared with those around us. The race, he said, will only get more destructive as the rich get richer and more numerous.
So... yeah. Down with excessive taxation, I guess?

Twouble With Twitter

Hilarious because (despite some hyperbole) it's actually pretty accurate.

For the record, I do occasionally Twitter, but I am highly sympathetic to its critics.

The Voicemail Blow Off

There has been quite a bit of discussion lately about voicemail being a dying technology. Frankly, I agree that email is a superior means of communicating than voicemail, and I prefer to send and receive emails rather than voicemails; but regardless of how second-rate voicemail is to other communications mediums, it’s still bad taste of blow off people who leave you voicemails.

My biggest pet peeve in life is getting stood up. When two people make a social pact to meet at a certain place in a certain time, it’s pretty grimy to not show. Not returning a voicemail isn’t necessarily on the same level of unacceptability, but it doesn’t make me feel particularly appreciated when I leave someone a voicemail and never hear from them again.

If you aren’t the type of person who wants to deal with voicemail, that's fine. There are at least a few options available. First, you can deactivate voicemail entirely. If someone were to call my office phone (and I don’t think anyone ever has since I don't give out the number), it would ring indefinitely. Or, you can explicitly state in your voicemail message that you prefer email and then clearly state your email address.

You have to be a pretty important person to have a voicemail message that goes something like “please leave your name and number and I will get back to you as soon as possible” and then blow off calls or expect to get away with the excuse that voicemail is a dinosaur technology. Yes, if someone really wants to get in touch they might be apt to leave both a voicemail and an email – but if the person doesn’t want to seem like a pest, they might be reluctant to do so, especially if they’re led to believe that you're going to return their voicemail as soon as possible.
A few weeks ago I saw a tweet from someone complaining that their Southwest Airlines boarding pass had been assigned A20 (meaning they would be at least one of the first twenty passengers to board the plane). Apparently this person though they should have been assigned a higher number, less their flight experience be considerably spoiled.

Despite the complaints, Southwest has resisted demands to assign seats on its flights, a decision which I personally applaud. I'll admit that I was skeptical when they rolled out the newest boarding procedure, assigning both boarding groups and a line number; but in hindsight it seems like one of the best operational decisions they've ever made. If nothing else, it effectively eliminated the infamous "cattle call" whereby fliers were getting to airports hours in advance and sitting in line on the floor as if they were waiting for the midnight showing of the new Star Wars movie.

When I was an intern at Southwest Airlines last winter, I was always one of (if not) the last passengers on board every Southwest flight I took, and frequently as part of the notorious 'C' boarding group. There really isn't any room for a non-paying passenger to complain about their spot in line, but folks who checked in late or otherwise got assigned to the 'C' group often balked at the process. Frankly, being in the 'C' boarding group has some pretty cool benefits.

Having an 'A' boarding pass basically guarantees your choice of a window or isle seat; most of the 'B' boarding pass holders typically get window or isle seat toward the back of the plane; for the rest, it's the dreaded middle seat.

But here is the thing... aside from completely full flights, being one of the last people on the plane means you get to pick who you sit next to. On a two or three hour flight, sitting next to someone friendly and pleasant can definitely be a lot more important than the ability to stare at clouds out the window or have easy access to the restroom (how many times does the typical person need to use the restroom during a flight, anyway?). Being in the 'A' group can be a roll of the dice in some ways. Maybe you'll get lucky and that middle seat will be vacantt. Maybe someone interesting will take it. Or maybe you'll find yourself next to the person (and everyone who flies frequently knows exactly who this person is) who you don't want to be next to. Being a 'C' group board pass holder effectively puts the ball in your court.

Good Advertising

The blogosphere seems to be one fire over Microsoft's new "Lauren" TV commercial. Frankly, I don't see what the commotion is about.

If the critics are correct, then "Lauren" is actually Lauren De Long, a Screen Actors Guild eligible actress; and apparently, if you look close enough, she never even enters the Apple store.

Even if all of that is true, it doesn't refute the fact that Apple's laptops are significantly more expensive than most PCs. It isn't a lie that Apple doesn't sell any 17-inch laptops for less than a grand. The advertisement doesn't make any reference to the quality of the machines (or contest any of the claims made in Apple's "I'm a PC" commercials) or provide any good reason to buy one other than price.

As far as I can tell, after years of horrible commercials and a series of flops, Microsoft seems to finally have hired an ad agency that put together a decent advertisement. It's not likely to persuade me to buy any of their products that I otherwise wouldn't; but they were destined to finally get at least one right. Congratulations, Microsoft.
Here's an idea for how to get ourselves out of the economic crisis:
We build more houses. There. That's it. It's so obvious, maybe that's why I'm the first one to come up with it. Houses got us into this mess, and by God, it's houses that are going to get us out! Think about it. We've got thousands of tradesmen out of work 'cause no one is building houses. Plumbers, guys who do drywall, the like—none of them have a job to go to in the morning. If the carpenters don't have jobs, then they aren't buying any lumber. Then the lumber guys don't have any money to buy dresses for their gals, and the dressmakers can't buy cars, and so on down the line. You see? They need jobs, pronto, otherwise we're going to be sitting on a load of lumber and dresses and cars. So I say, give 'em some houses to build! Then they'd have some money to spread around, and the economy wouldn't be so bad. Problem solved.
Yes, this was published by the Onion. Unfortunately, these ideas are not incredibly different than actual policy proposals being tossed around in Washington. More of my commentary on the housing crisis here.

Car-Free Living

I finally got a chance to read my copy of Chris Balish's How to Live Well Without Owning a Car, appropriately enough, on the bus ride to and from work last week. My expectations weren't particularly high, but I was impressed with Balish's simple and convincing argument. He might have been preaching to the choir with me as the reader, but I do think the book could succeed at persuading quite a few people.

Balish's hypothesis is that anyone can live a perfectly fulfilling life without owning a car, regardless of where they live or work. Of course, the claim sounds laughable to anyone who would immediately justify their needing a car to get to work, buy groceries, and everything else their daily life demands; the key is that the author's hypothesis doesn't claim that anyone can instantly and immediately give up the lifestyle they've developed over the years.

The belief that it can't be done stems from the decisions people have made in the past and assumes those decisions are unchangeable. If people aren't willing to alter their lifestyles or living situations, then perhaps it really cannot be done. But that isn't really the point of the book, anyway.
I had a macroeconomics professor whose idol is Ronald Reagan. "Let me tell you about Reagan," his stories would begin, "back when he was making movies the highest marginal tax rate was over 90%! Can you guess what would happen each year after he'd earned enough to be taxed at that rate? He'd quit making movies and go to Florida and play golf." I don't know exactly how accurate this story is, but what is true is that the top marginal tax rate at the time Reagan was doing most of his acting was somewhere between 70% and 91%.

Traditional macroeconomic theory suggests that as taxes go up, individuals consume more leisure and work less. I'm not particularly interested in contesting this point because it probably is true. In the case of Reagan, society was left worse off when he decided not to star in that additional film or cameo in another. I can only how much better life could have been if Ronald Reagan had done more acting and less golfing...

An underlying (but rarely discussed) assumption of the argument in favor of tax cuts for the rich is that their economic output is always positive. And herein lies the issue facing society today.

Ask a thousand people what caused the economic meltdown and there will be a variety of answers; but I suspect one that comes up with a high frequency is: greed. Michael Osinski built the software the packaged up and sold risky bonds because he earned windfall profits selling it to investment banks. Investment bankers sold these assets because they could make a killing on the commissions. AIG salespeople sold the insurance products on these products because it was a highly profitable venture. For most Americans, the prospect of making $200,000 a year would be welcome with open arms; but for the super-earners on Wall Street and elsewhere, it wasn't nearly enough.

The suggestion that taxes (on anyone) should be higher is political taboo, and the result is that few are asking questions about what could have happened in a world with higher taxes at the top on the income spectrum. If investment bankers and insurance peddlers would have been taxed at a rate of 90% on the bonuses they made while littering the financial system with toxic assets, maybe, like Reagan, they would have been golfing in Florida instead.

A commonly employed argument is that taxes are somehow immoral because it's akin to government taking money that they didn't earn - but here is the thing: there is a significant difference between changing the tax rate on income that people have already earned and income that people will earn in the future. If the federal government decided to double the tax rate on my 2008 earnings, they would essentially be "taking my money" in a manner consistent with the criticism. But if government decides to double the tax rate on my 2010 income, then I know full well how much of what I'm going to earn I'll be allowed to take home.

Creating a new tax bracket, say a rate of 80% or 90% on income exceeding $1 million, would only impact million dollar earners. It wouldn't change their incentives to make the first million, but it would disincentivize making any more. That's the thing about taxes - they have an incredible ability to change behavior.

At the end of the day, debating about whether or not a tax bracket on million dollar earners would have made a difference is counter-factual and we'll never know the answer. Even in a world in which a higher tax bracket might have prevented the financial crisis from occurring, it could have slowed legitimate economic progress as well. The question is: would we have been willing to live with less than breakneck speed growth knowing the alternative was the crisis we now face?
It's (unfortunately) not surprising that many of my peers will be graduating next month into unemployment; it is surprising how casual so many of them see to be about it. Grad school seems to be a popular option. It's burdensome and frustrating and requires a lot of energy to look for work, send out resumes and cover letters, interview, etc. - applying to the less selective grad programs is apparently like a rather straightforward process. I'm not against the idea of graduate school in principal, but part of me wonders if it's merely delaying the inevitable. "It's a good way to wait out the recession" is typically how the justification begins. When I ask if it concerns people that they'll graduate with an advanced degree and an anemic resume?.. "Not really. Plus, I could always become a professor and teach."

I imagine part the appeal of living the "professor lifestyle" stems from the belief that it's basically like living the "student lifestyle," where you can sleep in until noon, come in for a few hours every week, start the weekend on Thursdays at noon, and not really have to face serious consequences for any actions. I imagine part of the appeal is the belief that you can do work you really enjoy and are truly interested in and get paid for it to boot.

In January, Thomas Benton offered a simple piece of advice to anyone thinking about joining the PhD track in the humanities: Don't do it. The situation, it turns out, appears to be bad and getting worse...
Just to be clear: There is work for humanities doctorates... but there are fewer and fewer real jobs because of conscious policy decisions by colleges and universities. As a result, the handful of real jobs that remain are being pursued by thousands of qualified people — so many that the minority of candidates who get tenure-track positions might as well be considered the winners of a lottery.
Today, Gabriel Arana described the "lifestyle of adjunct professors" in The Nation, and it turns out to be a lot less glamorous than you might imagine. Plus, if adjunct professors are successful at unionizing, it could completely change the name of the game. While the under-paid, overworked, and under-appreciated professors in the university system today would see their situations improve for the better, it would essentially lock out the people who show up looking to teach later. To me, it seems like anything but a low-risk fall-back option.