The other day I was at Toby’s Estate’s Wooloomooloo outlet when I became inordinately interested in the menu pricing.

From my notes (I did mean inordinately) :

Short Black/Ristretto : $2.20

Long Black/Piccolo Latte : $3.00

Latte/Flat White/Cappuccino : $3.50

Here’s my puzzlement. It’s clearly not marginal cost pricing.  Whilst the extra labour and milk obviously add a slightly greater cost to the flat white compared to long black, these extra costs are also present to a marginally smaller extent in the piccolo latte which is priced the same. And the effort involved in adding already heated effectively free water to a cup for a long black can’t represent an 80 cent cost on top of a short black.

But we don’t expect perfect marginal cost pricing in many places anyway. Read more »

For some time now I’ve been arguing that we should do for information what we did for competition in the 1990s – adopt a national information policy in the image of national competition policy. National competition policy was a trawl through our economic institutions presuming that more competition was better than less and then requiring arrangements that restricted competition to be reviewed and then either justified or removed.  We also built institutions to entrench such an approach into policy making at all levels of government through COAG.

We could do the same with information.  We should presume that more is better than less, that open is better than closed and further that independence in the creation and dissemination of information is better than its creation and disemination by vested interests. Of course such an agenda would be large – as competition policy was.  And it would also be more complex than competition policy.  So while it sounds like the NCP it would be a larger, more diverse undertaking and would probably unfold over a longer period. Read more »

The New Yorker has just produced this profile of Paul Krugman.
In it we read the following passage.

It isnt that freshwater types believe that actual people are perfectly rationalthey just believe that making that assumption enables a more rigorous economics than is possible without it. After all, while there is only one way to be perfectly rational, there are an infinite number of ways to be irrational, and how do you choose? It all begins to look awfully arbitrary.

Hurrah! An non-lazy portrayal! Read more »

In December 2009, the official ABS Labour Price Index was running at about 3% per annum. This represents a continued trend decline in private sector wage rates (although less so for the public sector).

Wage rates refect the subdued labour market. In September 2009, about 26% of part-time workers wanted to work more hours, compared with 23% in September 2008. And the mean preferred number of extra hours per week for under-employed part-time workers was up to 14.1 hours, compared with 13.4 hours in September 2008. The part-time proportion may have increased further in recent months.

In short, we are still left with plenty of spare capacity. The recent decline in unemployment rate is a bad measure of the underlying rate of under-utilisation (number of hours worked). The economy is likely to achieve a trend growth rate of below 3% in the first half of this year. Stronger private recovery is likely to be offset by the lessening impact of fiscal and monetary policy contraction. There is no immediate need for further interest rate increases until our economy starts to record 3% to 3.5% increases.

As I travel the country preaching the great things about Web 2.0 it’s great to see a really interesting Web 2.0 app being launched from sunny Melbourne. Well actually I guess it was launched while its creator was living in Sydney but he’s just moved down to Melbourne where he and I had lunch the other day – we went on for a surprisingly long period of time.

I don’t know how many Troppodillians are aware of Innocentive – but it’s a site that brings together people with technical problems to solve and people to solve them. Kaggle is the Innocentive of data.  It will begin by hosting data competitions which will get that market for econometric skill humming along. I invited Anthony Goldbloom to send me a guest post for Troppo and he obliged with the post below. Read more »