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July 24, 2014

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Posted: 24 Jul 2014 12:06 AM PDT

'One of the Most Vivid Arithmetic Failings Displayed by Americans'

Posted: 23 Jul 2014 08:25 AM PDT

From James Choi:

Why the Third Pounder hamburger failed: One of the most vivid arithmetic failings displayed by Americans occurred in the early 1980s, when the A&W restaurant chain released a new hamburger to rival the McDonald's Quarter Pounder. With a third-pound of beef, the A&W burger had more meat than the Quarter Pounder; in taste tests, customers preferred A&W's burger. And it was less expensive. A lavish A&W television and radio marketing campaign cited these benefits. Yet instead of leaping at the great value, customers snubbed it. Only when the company held customer focus groups did it become clear why. The Third Pounder presented the American public with a test in fractions. And we failed. Misunderstanding the value of one-third, customers believed they were being overcharged. Why, they asked the researchers, should they pay the same amount for a third of a pound of meat as they did for a quarter-pound of meat at McDonald's. The "4" in "¼," larger than the "3" in "⅓," led them astray. --Elizabeth Green, NYT Magazine, on losing money by overestimating the American public's intelligence.

Another False Alarm on US Inflation

Posted: 23 Jul 2014 08:04 AM PDT

Gavyn Davies:

Another false alarm on US inflation?, by Gavyn Davies: There have been a few false alarms about a possible upsurge in inflation in the US in the past few years... There is an entrenched belief among some observers that the huge rise in central bank balance sheets must eventually leak into consumer prices, and they have not been deterred by the lack of evidence in their favour so far.
Another such scare has been brewing recently. ... As so often in the past, this happened because of temporary spikes in commodity prices, especially oil. But these have usually been reversed before a generalised inflation process has been triggered. ....
It now seems probable that part of the recent jump in core inflation was just a random fluctuation in the data. There have been suggestions that seasonal adjustment may have been awry in the spring.
But the main reason for the lack of concern is that wage pressures in the economy have remained stable, on virtually all the relevant measures. ...
On today's evidence, there has been yet another false alarm on US inflation.

'Wall Street Skips Economics Class'

Posted: 23 Jul 2014 08:04 AM PDT

The discussion continues:

Wall Street Skips Economics Class, by Noah Smith: If you care at all about what academic macroeconomists are cooking up (or if you do any macro investing), you might want to check out the latest economics blog discussion about the big change that happened in the late '70s and early '80s. Here's a post by the University of Chicago economist John Cochrane, and here's one by Oxford's Simon Wren-Lewis that includes links to most of the other contributions.
In case you don't know the background, here's the short version...

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