Tuesday, June 19, 2007

US Grand Prix

The North American part of the 2007 Formula 1 season has ended with Lewis Hamilton winning the US Grand Prix.

I’d love to comment further, but there’s not too much to add that hasn’t already been written. Check out grandprix.com for the report and other news.

Also, my main reason for not commenting is that I’ll be taking a slight break from blogging for a few weeks, maybe a month. Hopefully I can give myself a vacation since I haven’t taken one in more than a year.

Thanks for checking in with me, and I look forward to returning to writing in a few weeks.

Sunday, June 17, 2007

Buyouts and Mergers

There was one rather tidy rumor that came out of Steve Matchett’s (F1 commentator for Speed TV) mouth during practice for the Canadian Grand Prix. Apparently, Matchett tells us that if Toyota doesn’t see a change in its results within most probably the next two years, it will buy out the Williams operation and work from England, where most F1 engineers choose to reside.

All this would fit into Toyota F1’s business plan considering that the manufacturer has never had a problem before in making the right decisions towards efficiency and productivity. That is to say, they have run the Formula 1 operation on their own, and have now possibly seen that changes
need to be made as to how they run their F1 operation.

Economically speaking, I see this all the time with mergers, buy outs, and acquisitions occurring quite often. For a modern firm to see in its analysis that it can run, or be run, more efficiently in another manner is nothing new. All they need to find is a willing partner that can provide the synergies necessary to make a successful operation.

Toyota now already uses a gearbox from the Williams F1 team. I await the suggestions of other possible synergies and cost saving measures.

Thursday, June 14, 2007

Canadian Grand Prix

If you saw last weekend’s Canadian Grand Prix, then let me congratulate you on not having your head explode on what has to be the most eventful – not momentous or epoch, just eventful – Grand Prix I have seen in my lifetime.

The only item in that race that made sense to me was watching Lewis Hamilton win his first Grand Prix. It was a tremendous performance to see a driver who is in the lead for his first Formula 1 victory, actually pull through and make it happen considering that the entire field around him seemed to be about as organized as a bee hive being sprayed with RAID.

Jarno Trulli said that he came out of the weekend feeling only relief that the altercation involving the horrific accident of BMWs Robert Kubica after he had gotten into the rear of Jarno Trulli. Trulli said:

…the over-riding feeling from the weekend is not about light-hearted matters, it is one of relief.

Changing over to the good news category was Nick Heidfeld’s second place finish, Alex Wurz’s third place for Williams-Toyota, and Heiki Kovalainen’s fourth for Renault.

I think Grand Prix.com summed up the race weekend well enough when they wrote, “When Sato overtook Alonso on the main straight we concluded that we had finally seen it all.”

For Toyota there’s a change now up top as Tsutomu Tomita is retiring from his post as team principal. Tomita is 63, and normally around 65, and as far as I understand, it becomes Japanese custom to retire or begin a calmer chapter in life. Tomita will become the new man behind the Fuji Speedway, which will see its return of F1, September 30.

(picture taken from Toyota F1)

Wednesday, June 13, 2007

Will Zeallor Explains Paris Hilton

My friend and former peer, Will, with the most thorough and educated review of Paris Hilton.

The takeaway:

Above all else, Paris is the perfect narcissist. Current psychology holds that a narcissist is like a balloon: shiny, colorful, ever-expanding, and completely hollow on the inside.

Tuesday, June 12, 2007

Rally Acropolis

The Rally Acropolis two weeks ago saw Marcus Grönholm extend his lead in the World Rally Championship a few more points over Sebastien Loeb.

Subaru’s Petter Solberg finished third, and Chris Atkinson 6th. I had previously written that the rest of the season would turn into a long test for the team. But with reports that Xavier Pons will start driving a third car for the team, it seems that team might be thinking the Pons will be driving to gather more data for the team, while hopefully the other two drivers continue to improve.

Greece is a historically car-damaging rally, and this event was not much different. Chris Atkinson actually led the rally during the first day, until he hit a rock in the morning of the second day. Petter Solberg also was in second, until he suffered from a broken damper that brought him down the leader board. By the third day, both Subaru drivers were merely looking to consolidate their positions.

Going into the long summer break that is a defining characteristic of the WRC, the season leader boards look as follows with Ford continuing to run away with the constructor’s championship. In the driver’s standings, Grönholm also edged a little further away in the points over Loeb, while Miko Hirvonen still has a strong hold on third. If Subaru continues to improve its perform as it did in Greece, there is a slight possibility that Solberg might end up fighting for third with Hirvonen instead of battling with his brother, Henning, and Dani Sordo for fourth.


























M. Gronholm (FIN)



S. Loeb (F)



M. Hirvonen (FIN)



D. Sordo (SP)



P. Solberg (N)



H. Solberg (N)



C. Atkinson (AUS)



J. Latvala (FIN)


Monday, June 11, 2007

Public v. Private Academia

Academia can be very exciting, even when we are only talking about employing teachers. Even though I know the average student and/or person doesn’t think about it, there’s a bidding war out there for best and brightest…economics professor.

As David Warsh explained last week:

Some of the problem must have to do with the university's administration -- but not all. "Because of the way private university endowments are managed, they have grown substantially," says Gary Hansen, the current chairman. State budget appropriations haven't kept pace.

Here’s hoping the alumni donation check to the University of Delaware does something meaningful for the economics department. Luckily, many schools have significant individual donors, which is why the UD’s business college is named the Alfred Lerner College of Business and Economics.

Thursday, June 07, 2007

Adding Value with Dissidence

Last week, I saw a few interesting posts that caught my attention. It all started with David Warsh and his discussion of heterodox economics. Later on in the week, Arnold Kling argued on being too confident about your own intelligence while mentioning that he thinks most dissident views are wrong.

While I’m not sure if David Warsh thinks that most views in heterodoxy are wrong, he and Kling do agree on one thing for sure. Discourse can be strengthened when more ideas are brought, even if those views and ideas are of a minority and could end up being proven wrong.

It’s that kind of melting pot of ideas and possibilities that still makes academia so exciting to me.

Wednesday, June 06, 2007

An Economists Night Out

A very good friend of mine is getting married in July, and many of his friends (including me) got together to go out in celebration. However, this was not planned to be the proverbial bachelor party. That is to say that there would not be a stripper. To put it simply, it would be a night out with friends.

Throughout the night everyone (not me personally, everyone else) made our good friend wear a shirt denoting him to be “THE BACHeLOR.” (Sic) On the back of said shirt was a “Grope-Me-Ometer” (sic) so that anyone who groped him would be able to sign their name on the back of the shirt.

So, there’s your setup. While I would never do this to my friend, or anyone else for that matter, I decided that in order to spend time with my friend, a tradeoff of my friend embarrassing himself was allowable.

While we made a first stop at a bar that was not too busy, the group thought it better to move to another establishment. Better yet, a bar knowingly to everyone as having only homosexual patronage.

Unfortunately, they failed to realize that their plan didn't have a "let's allow Mike K to wait somewhere else while this goes on" contingency. Now you may say, gee Mike, "why so scared of being in a gay bar?" Well, I'll tell you why...

This blog post from Emil Steiner, which I read just two days prior to our adventure, gets to the heart of the matter.

From Steiner’s post:

In her opinion, deputy tribunal president Cate McKenzie found that "allow[ing] large numbers of straight men and women and lesbians into the bar could 'undermine or destroy' the convivial atmosphere that the Peel Hotel sought to create for gay men."

Now, I agree with what Steiner writes on later in his post, in that the ruling might be interpreted as saying that different lifestyles can’t co-exist with each other, and that is a bad message. But back to my point…

What the article told me was that our group’s presence at this bar might not exactly be appreciated. Soon after our arrival, irony decided to show its way through the door with a bachelorette party, and as serendipity would have it, they were our age. (If you read the post from Steiner, you’ll see that in theory the bachelorette party might not help our situation). But, you might still be thinking to yourself though that I’m just making this problem up. Well, let me try to refute that very reasonable argument.

I can’t tell you how many times we were suggested that another bar was a much more happening scene that particular night. But being that I don’t drink alcohol, I was able to see under the “signaling” that the bar patrons were trying to coax us out of their establishment and get out of their hair.

I guess I can now say that I have, in fact, lived out one of the story lines to an Electric Six song.

We soon left for another bar. As luck would have it the bachelorette party arrived there as well only minutes after. Having another group of ladies there that our group had befriended is vital to the real economics for the night.

Sitting next to my friend, let’s call him George; he had started conversing with one of the members of the bachelorette party; the sister of the bride / maid of honor to be exact, and a very pretty lady if I do say so myself. Another one of our friends lets call him Richard, showed up, and the conversation immediately had gone over from George to Richard. I was pretty amazed at how quickly this was done, but it wasn’t new to me. I had known Richard actually from a few years ago when I was in college, and I had observed his personality and charisma first hand. Richard has always been a magnet for women since I’ve known him. What surprised me was that he was able to take the conversation away from George, whom I think is a stand up guy, so quickly.

Well, needless to say George was surprised…to say the least of his reactions. What was the crux of the economic issue though? Well, first in terms of an overall market perspective, Richard operates like a monopoly. Actually, that may be too much of a stretch. Let’s say that Richard operates more like Microsoft, and someone like George is like Apple/Linux. That is to say, Richard already has a girlfriend, and yet he can still attract more clients / women. Why? Well, we can deal with that in another post.

Backing off from the market perspective, how was I able to have such a different reaction then George? The answer comes to us from looking at things as an economist again. Now, a communications major might say, “George felt that he had lost face.” As an economist, I won’t disagree with that, but I’ve been able to cope with Richard and the reaction that women have to Richard by simply realizing that this is the market operating.

If a woman were to be talking to me, and then start talking to Richard after only ten seconds of his arrival, I could get mad as I used to when I was a naïve freshman in college. However, what I’ve found out is that Richard has most likely one of two things: a great personality like mine, or an even better one. That is to say, Richard produces either as good a product that I produce, or better. It is, in fact, that simple. Now, when I say “better,” I mean “better for girl x.” It’s really just a better product for her, so she’s making that choice as a consumer.

There’s another way to look at this as well. Essentially, if and when you’re talking to someone whom you’d like to “court” (I have no other way of nicely saying, “Someone you have the jones’ for”) you’re starting the beginning of contract negotiations and looking for signals. Now, at what point in the relationship someone says “Let’s not entertain anymore contracts” (i.e. let’s be exclusive to each other) is up to the couple. So, technically, if Richard’s lady friend (remember I said he was seeing someone) sees his actions as a breach of contract, then maybe they’ll have to restart negotiations.

Tim Harford did a great job explaining this:

In 1920s America, courts would enforce ”breach of promise” suits for ladies who had been promised marriage, slept with the cad and then been dumped... Courts no longer do this, which is why it became traditional to supplement such proposals with non-refundable deposits, to be worn on the ring finger.

So, while George can be mad that Richard stole the conversation of our new lady friend, I had to marvel and take comfort in how the market works. The lesson is, in the beginning of contract negotiations we can’t help if the other party entertains other offers, or ends up taking them. And with Richard in particular, while he may have a relationship of his own, he hasn’t given his lady a “non-refundable deposit to be worn on the ring finger,” as Tim Harford put it, and technically he might be allowed to entertain other offers if his current contract allows him to (i.e. his girlfriend says it’s okay to talk to other women in bars).

Also, maybe for another blog post, we can talk about the different interpretations and possibilities of what “entertaining other offers,” means. Also, we might be able to discuss at what part of the contract “due diligence” is required and completed. There’s a lot of grey area in there, and in the end, the two contracted parties involved in a relationship are the ones who set and enforce the rules for each other.

I should start bringing textbooks to bachelor parties.

Monday, June 04, 2007

Controlling the Narrative

E.J. Dionne had an op-ed recently in the Washington Post about the messages of each party’s main candidates, and what the voters in their parties respond to and care about.

The takeaway:

Consolidating these results dramatizes how different Democraticland is from Republicanland: 42 percent of Democrats listed one of three big domestic issues (the economy, health care and education) compared with only 20 percent of Republicans. The hot-button issues of immigration and abortion were overwhelmingly Republican concerns (20 percent to 2 percent).

And so the Democrats who debate on Sunday and the Republicans who debate on Tuesday will offer a portrait of an election in which our parties are speaking different languages to two very different Americas. This can't be good for us, and it surely won't help whoever is lucky or unlucky enough to be our next president.

The constituents and the candidates seem to set their priorities differently and the problem is that there is yet to be a candidate that is honest and sincere about all the issues. Each candidate seems to be content to cater to the narrative of their party, and not speak . I at least hope this will change after the primaries.

I believe this is partly as to what leads to the myth of the rational voter.

Sunday, June 03, 2007

Monaco Grand Prix

In the last Grand Prix at Monaco (or Monte Carlo if you so prefer) we saw Toyota yet again flounder around in the back of the pack. I’ll be honest in that I never expect good things from Toyota at Monaco. Apart from last year’s close-call podium finish for Jarno Trulli (he retired with a mechanical failure), Toyota rarely shows well on that street circuit.

Trulli and Ralf Schumacher finished 14 and 15th respectively, two laps down.

The FIA was investigating McLaren for violation of the sporting code. That is to say, they wondered if they purposefully held back Lewis Hamilton to let Fernando Alonso win. A few days later though, McLaren was cleared when they reviewed the radio transmissions and saw that the team was running a strategy that would ensure they would finish with the maximum points possible for the team.

Even my friend, Dave, got caught up in the McLaren hysteria here and here. In my opinion, the rule itself is such a tough call in terms of how we define what “team orders” are, and how they should affect the race. Not only that, but as an economist, I have to admit that the penalties are quite draconian in that I never have any idea how severe the penalties are for certain infractions.

With that said though, McLaren Mercedes has been the best team by far this season. Ferrari, while having a strong car, and many thought the best car, has struggled relative to their expectations. BMW is also the surprise team of the year being that they are the third best.

While everyone is surprised at the drivers’ standings, I am not. Alonso is the reigning champion, and Lewis Hamilton is obviously a talented driver on a talented team. For people with utter amazement at Hamilton, let me just tell them to calm down. As it turns out, fantastic drivers on fantastic teams usually end up doing well.


1. FERNANDO ALONSO Spain McLaren-Mercedes 38

LEWIS HAMILTON Britain McLaren-Mercedes 38

3. FELIPE MASSA Brazil Ferrari 33

4. KIMI RAIKKONEN Finland Ferrari 23




8. NICO ROSBERG Germany Williams-Toyota 5

9. JARNO TRULLI Italy Toyota 4

DAVID COULTHARD Britain Red Bull-Renault 4

11. HEIKKI KOVALAINEN Finland Renault 3

12. ALEXANDER WURZ Austria Williams-Toyota 2

13. RALF SCHUMACHER Germany Toyota 1

TAKUMA SATO Japan Super Aguri-Honda 1




3. BMW 30






My Political Compass

Here is my Political Compass. Why show this? Well, because Greg Mankiw did one, and Dani Rodrik told me to.