The Economics of Exclusiveness

I was reading Thomas Sowells recent article, Prestige Versus Education, and something occurred to me. One of the points he made was:

“Some students may feel flattered that Harvard, Yale or M.I.T. seems to be dying to have them apply. But the brutal reality is that the reason for wanting so many youngsters to apply is so that they can be rejected.”

He continues:

“Why? Because the prestige ranking of a college or university as a "selective" institution is measured by how small a percentage of its applicants are accepted. So they have to get thousands of young people to apply, so that they can be rejected.”

This is not unique to big universities either, even preschools do it. Some prestigious preschools have waiting lists over seven years long, parents have to send in an application a year before they conceive.

Certain restaurants have two year waiting lists (for normal costumers) and enforce a strict dress and etiquette code.

The sunglass-hut sells Ray Ban glasses for 70 to 500 dollars apiece.

Ferrari produces certain “special editions” of their vehicles, producing only about a 100.

There is nothing wrong with this, and the items mentioned above are high quality; but they are also selling something more then quality: that being a sense of exclusiveness.

Ray Ban can mass produce their glasses and sell them for 30 dollars apiece; Restaurants, if the demand is that large, can expand*; Universities and other prestigious educational institutions can also expand, I’m sure that the 70,000 people who apply for NYU each year would love to get in.

This is where basic economics comes in; in all these cases, greater demand is being created by artificially lowering supply. Of course, demand is likely to be high anyway, because of the quality of what is being sold; the only way this works is if quality matches the hype, artificially lower the supply of Barbie-doll knockoffs and nobody will care.

There is nothing inherently wrong with buying rare items; as humans, we feel that there is something special in the unique. If diamonds began falling from the sky like raindrops, we would probably find another way to express our eternal devotion. When given the choice, most will chose an original painting at a higher price then a print (even if that print is a perfect recreation.)

Some will say that this is yet more proof that advertising and consumerism are manipulating the masses. Though it is probably true that certain producers fuel this desire, the economics of exclusiveness is likely in response to consumer demand, and not created by some malevolent producer.

This is where the old anti-capitalist argument comes in; where Dick, in order to be better then his neighbor, embarks on an obsession with the material, an orgy of unhealthy buying. I will say that there are people like this out there; but are these desires “created” by the producers, or an expression of something else?

Fundamentally, Dick is motivated by a desire to impress others, or gain a felling of superiority. Anthropologically speaking, both these are products of the desire for social approval. A sense of insecurity, or a lack of self, motivates Dick, not anything material. Those who think that pre-capitalist Europe or third world countries don’t produce people like Dick are fooling themselves.

It is important to separate a genuine admiration of the unique and the unhealthy obsession with the exclusive. We admire those in the Olympics because not everybody possesses great physical aptitude; the same way we admire great painters, singers, or a well-made diamond ring. In this sense, the desire for the special is actually healthy.

Though there are unhealthy desires for the special. Is NYU worth 10 times as much as a local state college? Are Ray Ban sunglasses worth several times as much as ones you can find at your local drugstore? Is it worth it to buy an original Monet and not a good print? Quality and greater monetary value does not necessarily equal greater personal value. Is my desire to acquire this thing a respect for the great and the unique, or just a need for the exclusive and validation?

These are two completely different desires that, on the surface, appear to be the same. One needs to know their own personal motivations, and be careful not to confuse hype with reality.

-Ryan


* Restaurants often sell a particular chef, one that personally cooks or oversees all the food in the kitchen; so there is a physical limit to how much they can produce; trying to expand would likely change the meal, if ever so slightly. So there is good reason for the exclusiveness of some restaurants.

Veksler on the Future

There is an excellent article by David Veksler about the future at Truth, Justice, and the American way (link to the right.) The article is entitled: Our Techno-Utopian Future: Fallacies and Predictions.

It draws heavily from the works of Ray Kurzwiel and the like, but still offers many new interpretations to the mix; like that our sense of self will be expanded, not contracted, by future technologies.

He does talk about the increased capacity of future people interfacing with computers, but does not mention that, with increased capacity comes increased expectation. New plateaus are reached, if everybody suddenly became twenty-times as strong as they are now, we would not limit ourselves to our formal activities, but expand on them (the Olympics, for instance, would change and expand, as with many other activates.) So those who think the future will be a breeze, with the ability to download information into your brain and lose weight with a pill, are wrong.

It is worth reading, for a quick overview on some of the legitimate worries, and not-so-legitimate worries, and why the future is something to be very optimistic about.

Urban Gymnastics

The best way I can describe this is free-style acrobatics. It is not properly defined as an extreme sport, nor fully a martial art, parkour encompass a great deal into its rather vague set of goals; ultimately, I think its purpose is to have fun.

Pankour stresses freedom of movement, understanding of the body and limitations, and split second reaction time. According to some, it is the art of moving over obstacles as efficiently and as fast as possible.

There is information on Wikipedia about it:

There are also several good Youtube videos that showcase it here, here, and here.

The closest thing I can relate it to in my experience is talus running; this is a technique favored by rock climbers to build up reaction time and foot speed, it involves running very fast over rocks or an uneven surface. There is also the climber concepts of the ballerina, the cat, and the monkey, that parkour seems to have adopted; these three disciplines is how a climber is supposed to face any given situation (jumping like a ballerina, landing like a cat, and using your limbs like a monkey.)

All the people in the videos above seem to use the same techniques, to an amazing affect, it is incredible what they are able to do, and the distance they are able to fall safely is simply amazing.

Like many disciplines, this one is heavy on metaphor. Proponents of parkour claim that defeating physical obstacles can help you defeat other obstacle in life; from relationships, to work, to emortional problems; they even claim that it helps your critical thinking skills. The Pankour philosophy stresses constraint, to know ones limitations and not to push too hard. Pankour experts say that, Because of this philosophy, there are very few pankour accidents, which is surprising considering what they do.

I'm skeptical that parkour has that many benefits, but as for a fun pastime that helps flexibility, reaction time, and understanding of your body (not to mention exercise), I think parkour is the next big thing.

Gore criticizes Bush for ignoring Iraq's ties to terrorism

This is Al talking in 1992 about the terrorist threat from Iraq. He makes a good case; we better take out Saddam!

He strongly criticizes the first Bush administration for ignoring the Iraq contribution to terrorism, also saying that they are lying to the American public and manipulating people to support this denial.

It’s odd, he is using the same arguments in 1992 as he is using now, but to the exact opposite purpose.

In his book, the Assault on Reason, Gore criticizes the American people for buying that there are ties to terrorism within Saddam’s Regime.

Did he say any differently back when the issue was relevant? No. Apparently, Al was part of all us sheeple believing what the great manipulator, the media, was telling us; and not the lone voice of reason he likes to think he is.

A Review: ‘The Invisible Heart’, by Russell Roberts

I always thought that free-market enthusiasts got an unfair shake when it came to `Matters of the Heart" (free-marketers get a bad shake on almost everything, but especially this.) For too long, `love' and `caring' have been concepts monopolized by the John Lennon's and Michael Moore's of the world. Now, Russell Roberts has formed a romance that finally does justice to the 'romantic free-marketer.'

The story follows Sam Gordon, an economics teacher and a passionate supporter of free-markets, and Laura Silver, and equally passionate professor of literature (who-by the way- is the `anti-Gordon' when it comes to markets.)

Perchance these two meet in the subway, and not so surprising considering there viewpoints, a debate ensues. Despite very different opinions, they find they enjoy each others company.

There is also a nice parallel story about Charles Krauss, a corrupt CEO of a pharmaceutical company, and Erica Baldwin, an employee at the `Office of Corporate Responsibility', who is trying to bring him down. There is a pleasant surprise concerning this story-line (which, for any who know about Russell Roberts, feels odd), which I won't ruin.

All this cumulates to the end where, after many debates, politics, and courting, it all comes down to a very satisfying ending. It is fair to say that this story is about two main things: Love and Economics; but I don't want to imply that the characters are forgotten, each character Robert's develops is suitably complex, the characters feel real and sincere, as does their romance.

What is so delightful about this book is the breezy and fluid way in which it is written; Robert's moves from international economic theory, to relationships, to politics and scheming, all without missing a beat.

The portrayal of the characters is also a strong point. People with different viewpoints are not seen as villains in the context of the book; Robert's makes a point that Sam and Laura are really like-minded people, despite there different viewpoints.

`The Invisible Heart', is a play on Adam's `Invisible Hand', which is the metaphor used to explain the way a natural economy is able to create complex systems with no central control. Just like the play on words implies, `the invisible heart' refers to the way a free-economy naturally helps the poor, sick and unable, all without coercion. It also has a double meaning, in describing the `heart' of economists and those who believe in free-markets. At one point a character describes economists as `a grim lot, only concerned with money', this book dispenses with that notion.

Roberts is incredibly fair-minded (though not `equality-minded.'). He makes points about the environment, charity, and admits that free-markets sometimes hurt people. Robert's doesn't sugarcoat anything, but displays it in its full context.

My favorite part of the book is Sam's final speech. For too long people have been holding on to the misconception that economics is only about money, this has never been true; an economic `value' can not be measured in a purely monetary way, `matters of the heart', or human motivation, needs, and wants; are the biggest part of economics, not the transfer of goods or services. At one point Sam proclaims, "The purpose of life is to live as richly as possible", a statement which is not about money, one that I think most would agree with.

With Roberts's first novel, `The Choice', he entertained me, with this novel; he has earned a loyal reader. Some say `write what you know', others say, `write what your passionate about', in this case Roberts has done both; his knowledge and passion for the subject matter and the characters comes out in every page, which makes for an incredibly enjoyable read.

Jet-Man

As a young lad, I dreamed what normal young lads do; becoming Batman (or, if I couldn’t do that, a Power Ranger), owning my own plane or monster truck, being able to lift very heavy things, and especially, being able to fly with my own Jet-Pack.

Well, one man in Switzerland took this dream more seriously then I did, and built himself his own jet-pack; it not quite Rocket-man, but its one step closer.

His foreign language website is here.

There are some good youtube videos of him here and here.

On an off note; this is one of the reasons I love economic freedom, it allows people to explore avenues that, in poorer or more controlled countries, will not be explored. Does China or Venezuela produce many Jet-Men? For that matter, do they produce many Bill Gates or Steve Jobs?

No, they don’t.

Free-markets help set these quirky geniuses lose, thats part of why I support them; if only in the hope that I can fulfill my dream of owning my own Jet-Pack one day.

Psychology Trick

Depending on which way you see this dancer spin, this site claims to know which side of the brain you prefer. If she spins clockwise you are right-brained, counter-clockwise and you are left-brained.

The moving dancer and the full site are here.

This is the same as the classic box trick to the right (in which you are able to 'flip' the direction of the box), but more complicated because it is moving.

This test assumes some things in how we process visual information in relation to hemisphere dominance. The information from our right eye is processed through are left hemisphere, exactly the opposite with our left eye; this is why, depending on which way the dancer is spinning, the test assumes what hemisphere is dominant. The test also assumes that a right-brained person will turn the 2D image above into a 3D image (and have a harder time 'flattining' it in their mind), which makes it appear to turn clockwise.

The problem with this is that, even if your right-hemisphere is dominant in interpreting vision information does not mean it is dominant in other areas. Most people will see the figure move clockwise because most people right hemispheres do most of the visual processing.

Plus, the right-brain/left-brain dichotomy is no longer taken too seriously in the scientific world; current evidence shows that all reasoning processes are more integrated then we originally thought (so logic incorporates creative thought, and creative thought incorporates logical reasoning.) Mathematicians, for instance, must incorporate an incredible amount of creativity with logic and ‘hard’ math based skills of their field (Einstein, for example, was known for his incredible creativity.)

Still, it is fun to see which way the dancer moves, and to try to change her direction. I find it helps to look at the foot she is spinning on.

Art Vigilantes

This is a strange group of people; they call themselves “les Ux.” The full story can be found here:

Here are some excerpts:

“Mr Kunstmann belongs to les UX, a clandestine network that is on a mission to discover and exploit the city’s neglected underworld. The urban explorers put on film shows in underground galleries, restore medieval crypts and break into monuments after dark to organise plays and readings. In the eyes of their supporters, they are the white knights of modern culture, renovating forgotten buildings and staging artistic events beyond the reach of a stifling civil service.”

“Mr Kunstmann said that les UX had 150 or so members divided into about ten branches. One group, which is all-female, specialises in “infiltration” – getting into museums after hours, finding a way through underground electric or gas networks and shutting down alarms. Another runs an internal message system and a coded, digital radio network accessible only to members. A third group provides a database, a fourth organises subterranean shows and a fifth takes photographs of them. Mr Kunstmann refused to talk about the other groups.”

“Last year the Untergunther [one sect of the group] spent months hidden in the Panthéon, the Parisian mausoleum that holds France’s greatest citizens, where they repaired a clock that had been left to rust...When the clock began working again, officials were horrified. The Centre for National Monuments confirmed that the clock had been repaired but said that the authority had begun legal action against the Untergunther.”

Perhaps these people are the new superheroes, a justice league that protects antiquates from abuse and evil.

This also has thematic appeal. Can you imagine it? The movie starts with a young Bruce Wayne, who tragically witnesses the destruction of his grandmother’s antique armoire at the hands of an incompetent mover; this motivates young Bruce to travel around the world, gaining skills so he may pursue a life of vigilante justice.

Yeah, I’d watch that.

Nobel Al

My world-wearied and cynical response to the reality that Al Gore will get a Nobel Prize was: so what.

Yasser Arafat and Jimmy Carter have received Noble Peace prizes, it’s not like Al Gore can disgrace the tradition anymore.

For those that don’t know, Yasser Arafat received the honorary award because he promised to stop killing people in Israel; Jimmy Carter’s award was slightly less dubious, he paid off people like Yasser Arafat to stop attacking our allies (of coarse, he supported evil regimes to do so.)

What has Al Gore done to truly receive this award; the answer is, not much. He made a documentary about something that will likely be forgotten in twenty years (when its replaced with the next environmental catastrophe.) His actions as the vice-president weren’t spectacular; neither are his actions on any front; in fact, he seems downright hypocritical in many aspects of his life.

This reveals a fundamental flaw in the current Nobel system: even if Al Gore is right about everything, and has lived consistently with his own beliefs; the Nobel prize is supposed to celebrate what people have done, not what they will or might accomplish, the award is not supposed to honer intentions.

It’s a shame that the Nobel Prize is handed out so lightly, and all to support blatantly political ends. These actions demean all those who truly deserve the prize; those who, through their actions, have done real good in the world.

Though it should come to no surprise, politics corrupts everything. The Nobel prize, in any field, is supposed to celebrate the greatest and the truly exceptional. I suppose even this goal couldn’t help but be tainted by the grey weight of today’s political climate.

Economics for Families

The Settlers of Catan board game:

I admit it, I never quite liked Monopoly. The game was enjoyable enough, but it never seemed to end, trading was never a big enough part of the game, and winning only came from punishing your opponents (which wasn't altogether un-fun.) But then I discovered the Settlers of Catan, and my dissatisfaction with economic-based family gaming evaporated.

Finally, here was a game that properly represents economics (in an abstract, scaled down way), that the main objective was to grow, instead of bankrupting other players, and more importantly, it could actually be played within an hour. Like Chess or Go, the Setters of Catan is very easy to learn, but very hard to master; creating ever-intriguing game-play.

The game is played on the Island of Catan, which is made up of several pentagons representing different geological areas; each one of these areas are given a number between 2-12, not including seven; Depending on the placement of these Pentagons and the numbers (which are separate), the game is different each time.

A player wins the game by building roads, settlements, and cities, or by purchasing various `development cards', which give special powers or points to any player. Building anything, or buying development cards, takes a certain combination of natural resources (represented by cards in the game.) Each settlement and city is worth a given amount of points, and the longest road gets a bonus; the first player to get 10 points wins the game.

To do this, a player must collect, spend, and trade resources; which are the core of Catan's play. Each geological area produces a different resource: Forests produce wood, valleys produce wool, deserts produce brick, fields produce wheat, and mountains ore. A player collects these resources by placing a city or settlement adjacent to these areas, the number placed on the area is for the dice, which determines what resources will be distributed that turn: So, for instance, is a person roles a `6' on the die, all areas with the number `6' on them give resources to whatever settlement or city is touching it. Of coarse, there are different ways of collecting resources, such as harbor trades or theft (both of which consist of a large part of the game), but I'll let you discover that.

This might all seem a bit complicated, but once you are playing and looking at the board, it is all very logical and easy to pick up; general rule, if you can play Monopoly, you can play Settlers of Catan.

The game incorporates a good amount of strategy (mixed with a bit of luck.) A player must decide where to start on the board, what to trade (which is almost required for each player), where to build roads to, and how to best rack up points to win. A player, for example, may decide to block another player's mobility, and gain points slowly; or, by looking at the board, decide to control a crucial resource (by placing cities or settlements around a resource area, which can only be occupied by so many objects), and in so doing become a necessary trading partner; there are almost endless strategic opportunities presented in Catan, which is part of what makes this game so fun.

Kids and adults alike can learn something form the resource system. I find that how resources are distributed in the game is very much like how they are distributed in real economies, with rarer, more valuable resources being more `expensive' in trades.

If I had one complaint about the game, it would be the limited number of players required (3-4 players); you can by an expansion which will allow 5-6 players; still, Catan is not good for large groups or for duos.

Still, this game has quickly become, not only one of my favorite family games, but one of my favorite simple strategy games as well. It is a worthy addition to any game-lovers shelf.

I am even considering buying the online computer version, for I don't have to wait for family gatherings to play.

A Review: Russell Roberts’ The Choice: A fable of free-trade and protectionism

I don't really consider this a work of fiction, and neither does the author. It is in a fiction format, but its primary purpose is to make the case against protectionism, and for free markets. Roberts does this beautifully, raising and dismissing almost every argument for protectionism, and doing this with charm, wit, and almost a complete lack of venom.

The story follows the time-traveling journey and conversation of Ed Johnson (a businessman looking for protection form Japanese competition) and his guardian angle David Ricardo (modeled after the little-known economist.) Together they travel to the future, back to the past, and through alternate timelines to demonstrate Robert's point.

Through this journey, Ricardo corrects some critical mistakes in economic theory; such as the `zero-sum theory', misconceptions on the nature of supply and demand, the role and meaning of wages and `real' wages, the mythical "dangers" of a trade deficit, what imports and exports really are, and most of all, dismisses the myth that trade with other countries hurts the American worker overall (which he admits, in a smaller sense, it sometimes does.)

The book takes some leaps of logic, which the author fully admits in the back of the book; such as the town of Star (Ed's hometown) being unchanged in the `protectionist' universe. These little plot devices are not meant to represent reality, but demonstrate more abstract points, in that sense, it is more like a metaphor.

Overall, the book makes one of the strongest cases ageists the practicality of protectionism that I have ever heard. He also fits some talk as to the moral case against it, that it is really an issue of freedom, and no one person has the right to force another in to a certain kind of behavior (A.K.A., buying American products) and that "America" is all about dreams and growth, something not very possible in the protectionist world.

My only complaint would be that I wanted more elaboration on some sections of the `conversation'; such as the `dumping' segment. Robert's makes a good case that dumping is not really practical for anybody, that the `dumper' would have to make up for lost profits from lowering their prices. What I don't understand is....what if a company could cover their lost profits in profits from another product, or section of their company (Such as a department store lowering prices on televisions and allowing the produce-department to cover the loss.) I wish Robert's would have gone in to slightly more detail.

There are several section of the book like this; but I want to make clear is that Robert's never claims that this is the ultimate source for `anti-protectionist' arguments, he even suggests further reading in the back of the book, something all reasonable people should do if they are truly interested in understanding the complexities of economics.

I love Robert's style of writing, his books are not just informative, but entertaining, something very hard to achieve for this subject matter. The book was good enough that I ordered His other book, The Invisible Heart, form Amazon. After seeing what he did to It's a Wonderful life, I can't wait to see what he does for a romance novel.

Wealth Well Spent

The beautiful super-sailboat Adele.

It is one of the few sailing-yachts that actually sails around the world with its owners. It sleek design is all modern, but is has a touch of the classical in its wood finish.

Some pictures of its interior are here

Her main website is here

And pictures of her voyages are here

This boat has been to some incredible places. Its owners are able to experience the independence, fun, and adventure of sailing all in a first class setting.

I don’t know why, but it is nice to see somebody that knows how to spend their money.