Tyler Cowen's Blog, page 232

The Economics of Online Education

The Economist covers the economics of online education:

Alex Tabarrok…reckons the most salient feature of the online course is its rock-bottom marginal cost: teaching additional students is virtually free.

..as prices converge towards marginal cost, there will be little scope for undercutting the competition. Instead MOOCs are likely to compete on quality…Higher production costs are a small price to pay to attract much greater numbers of students. Such markets often evolve into winner-take-all, “superstar” competitions. The best courses attract the most customers and profit handsomely as a result. In this respect online education may more closely resemble information industries such as film-making than service industries such as hair-cutting.

The market for textbooks already fits this description. New textbooks are costly to write and design but can be reproduced fairly cheaply. Not surprisingly, only four introductory economic texts account for half of the American market, according to Mr Tabarrok. Indeed, says Tyler Cowen, a co-founder of Marginal Revolution University, it is possible that textbook publishers are better equipped than universities to develop MOOCs profitably.

I agree also with a point made by Caroline Hoxby:

Less selective institutions are close substitutes for MOOCs. Course content is often standardised and interaction with professors is limited in order to keep costs down.

…Elite institutions face very different circumstances, Ms Hoxby reckons. They operate like venture-capital firms, offering subsidised, labour-intensive education to highly qualified students. They aim to cultivate a sense of belonging and gratitude in students in order to recoup their investment decades later in the form of donations from successful alumni…. For top schools, the best bet may simply be to preserve their exclusivity.

Do more popular people shy away from controversial Facebook discussions?

There is a new paper by Jang SM, Lee H, and Park YJ, here is the rather depressing abstract:

Abstract Although previous research has indicated that Facebook users, especially young adults, can cultivate their civic values by talking about public matters with their Facebook friends, little research has examined the predictors of political discussion on Facebook. Using survey data from 442 college students in the United States, this study finds that individual characteristics and network size influence college students’ expressive behavior on Facebook related to two controversial topics: gay rights issues and politics. In line with previous studies about offline political discussion, the results show that conflict avoidance and ambivalence about target issues are negatively associated with Facebook discussions. Perhaps the most interesting finding is that users who have a large number of Facebook friends are less likely to talk about politics and gay rights issues on Facebook despite having access to increasing human and information resources. Theoretical implications of these findings and future directions are addressed.

The link to the paper is here.  Of course one possibility is that popular people do not want to endanger their popularity with controversial discussions.  Another is that non-controversial people are simply more popular to begin with.

Hat tip goes to @Neuroskeptic.

The Private Rationality of Bottled Water Drinking?

That is a new paper by W. Kip Viscusi, Joel C. Huber, and Jason Bell, the abstract is here:

This article examines evidence for the private rationality of decisions to choose bottled water using a large, nationally representative sample. Consumers are more likely to believe that bottled water is safer or tastes better if they have had adverse experiences with tap water or live in states with more prevalent violations of EPA water quality standards. Perceptions of superior safety, taste, and convenience of bottled water boost consumption of bottled water. Blacks and Hispanics are more likely to drink bottled water due to their relatively greater exposure to unsafe water and greater risk beliefs. The coherent network of experiences, beliefs, and actions is consistent with rational consumer choice.

That is rationality at the margin, of course, as the entire practice of bottled water in developed countries strikes me as not rational for most people.  Tap water is fine and to me even tastes better.

Hat tip goes to www.bookforum.com.

*The Sabermetric Revolution*

That is the new book by Benjamin Baumer and Andrew Zimbalist and the subtitle is Assessing the Growth of Analytics in Baseball.  It is an excellent and well-written look at where sabermetric knowledge stands today, here is one excerpt:

…once the ball has been put into play, it doesn’t seem to matter all that much whether it was put into play against Roger Clemens or Roger Craig.

And:

…an extra win will bring more revenue to a team in New York City than in Kansas City.

This is a very useful book on its chosen topic.

Assorted links

1. Singapore staring.

2. Why are helicopters so loud?

3. Yolkfish there is no great stagnation.

4. How many days after a tragedy does it take until people find the jokes about that tragedy funny?

5. Do hunter-gatherers show weaker endowment effects?

6. The changing economics of financial journalism.  And true (?) facts that sound false.

More on the possible benefits of Ethereum

Robert Sams points me to this New Scientist article, here is one bit:

Ethereum allows for the creation of complex, yet decentralised, economic tools like financial derivatives, in which two parties can bet on the rise and fall of an asset, or crop insurance that pays out to a farmer according to a weather data feed. Creating decentralised versions of Dropbox or eBay should be possible too, claims Buterin.

Other developers are attempting to copy Buterin’s success by overlaying new code on the existing Bitcoin block chain. One example is the concept of “coloured” coins: with bitcoins labelled to represent other assets such as gold, cars or even houses, you transfer ownership when you trade the labelled coin.

Buterin says Ethereum is much more flexible. “Bitcoin is great as a form of digital money, but its scripting language is too weak for any kind of serious advanced applications to be built on top.”

One of the more advanced concepts being touted for a next-generation Bitcoin is the idea of decentralised autonomous corporations (DAC) – companies with no directors. These would follow a pre-programmed business model and are managed entirely by the block chain. In this case the block chain acts as a way for the DAC to store financial accounts and record shareholder votes.

In a way, Bitcoin is actually the first DAC, says Daniel Larimer, a developer in Blacksburg, Virginia. People who own bitcoins are shareholders in the company, which offers financial services, earns revenue through transaction fees and pays a salary to its employees, the miners. But no one is in charge.

Here is my previous post on Ethereum.

Altruistic Kidney Donors Favoring Financial Compensation

Dmitri Linde joins Alexander Berger and Virginia Postrel as altruistic kidney donors who advocate for lifting the ban on financial incentives. Here is Linde:

Two policies would address the shortfall of kidneys in the U.S.: instituting a priority-scoring system for donors and their kin and paying donors.

Israel pioneered the former in 2012. Prioritizing organ allocation by donor status—a system that economist Alex Tabarrok termed “no give, no take”—incentivized people to register as organ donors. It also removed a hurdle to living donation: The incentive to abstain because of a hypothetical (What if my son needs a kidney?) went away since the policy guarantees that a donor’s kin will be prioritized in the event that they need a transplant. The results? Both living and deceased donations have gone up, and the number of people who have died on the waitlist fell by 30% between 2010 and 2013.

To obviate the kidney shortage, we should heed the recommendation of Nobel Prize-winning economist Gary Becker and others by making it legal to compensate donors.

Linde donated a kidney with the aid of the excellent National Kidney Registry. The registry matched him to a recipient whose own willing but incompatible donor donated to another patient in need. Bravo Dmitri.

Here are previous MR posts on organ donation.

The economic problems of Puerto Rico

Felix Salmon writes:

Puerto Rico is now shrinking at a 6% annual pace, and that number is probably going to get worse before it gets better. The chances of the island’s economy actually growing at any point in the foreseeable future seem remote: indeed, the country has essentially been in one long and nasty continuous recession since 2006.

Puerto Rico has $70 billion in debt outstanding, all of it needing to be repaid with interest — and the simple fact is that there’s no way it’s going to be able to do that, if its economy continues to shrink and its most talented nationals continue to decamp for the mainland, where their prospects are much brighter. Labor mobility from Puerto Rico to the rest of the US, and particularly to Florida, has never been higher, while most of the migration in the other direction comes in the form of retirees, who are not exactly going to kick-start the economy. In fact, in terms of the labor force participation rate, they’re just going to make matters worse, on an island where only 1.2 million of the 3.4 million inhabitants are employed.

Ryan McCarthy adds more.

If your parents died early, will you die early too?

But in fact the correlation of longevity between individual parents and children is very low.  For the people dying in England in the period 1858-2012 with the rare surnames used in chapter 4, we can measure the correlation of longevity between fathers and sons for more than four thousand sons surviving until at least age 21.  That correlation is only 0.13.  If we take the average of both parents’ ages at death, that correlation increases to 0.26.  But it is still low.  In reality, your age at death is not strongly predictable from your parents’ age at death.  All those saving more for retirement simply because both parents are fit, healthy, and in their nineties should stop immediately.  Your expected additional longevity relative to the average is only three years.

That is from Greg Clark’s new and noteworthy The Son Also Rises: Surnames and the History of Social Mobility.  Here is Kevin Drum on the book.

Assorted links

1. .  I recently spent time with a very interesting man, a philosopher in fact, named Johnny Anomaly.  And a Quora thread on the future of education.

2. Chinese fiscal policy, Buddha style.  And tractor square dancing.  And more Johnny-come-latelys come to Borgen.

3. Why Bach moves us.

4. Causal effect or difference in type?

5. And questions that are rarely asked (can I tickle myself if I swap bodies with another person?).

6. Solow and Mankiw go back and forth about inequality.

7. The Medical Actor (markets in everything).