Defining Value in a World of Diamonds and Foxglove

Last week, Freakonomics published a podcast entitled, “Diamonds Are a Marriage Counselor’s Best Friend.” It’s a great podcast and I’d recommend a listen, as it features a great exploration of how couples make decisions about money in the context of marriage. In addition to that, however, it covers a topic which I think is absolutely fascinating: the history of the value (or lack thereof) of diamonds. I think the example of diamonds is very instructive towards how we think about meaning and significance for all of the goods in our lives, but interesting as a standalone story as well.

I’ve written about this previously, but I’d like to bring my words up again as I think it’s a discussion worth having. Regardless of whether or not you disagree with the diamond industry, I believe that it is helpful to develop an understanding of how you determine value in your own life.

The Llama and the Cow

Wild Foxglove in the Quinault Rainforest – Photo by Me

A few weeks ago, my parents came to visit me in Seattle.  It was great to see them again, hang out with some family friends, and spend some time exploring the Pacific Northwest.  Never having been to Washington before this summer, one of the things we wanted to do was check out the rainforests in the Olympic Peninsula.  We settled on going for about a 5 mile hike in Quinault, since it was the easiest of the Olympic’s three rainforests to get to. Unfortunately, Quinault was a little bit disappointing.  There were fallen trees everywhere. So, instead of the shady canopy I had been expecting, we were met with fairly regular sunlight.  (It turns out that the area was hit with hurricane force winds in 2007, which was probably the source for many of the fallen trees we saw)


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Why We Don’t Need Bigger Roads, Just More Engaged Drivers

A Friend Snaps a Photo of Our Reflections in the Window as We Wait for an Elevator on the Campus of Purdue University, 12/1/2010

A friend of mine snaps a photo of our reflections in the window as we wait for an elevator on the campus of Purdue University, 12/1/2010

I was once in a course on economic thinking, and the class was posed the following question:

“Workers in a high-rise office building are complaining about having to wait too long for elevators. The level of discontent seems to be rising. What might be done? Some suggestions are offered. These include:

  1. add more elevators;
  2. increase the size of the elevators;
  3. speed up the elevators;
  4. stagger the working hours of different groups in the building;
  5. make some of the elevators go non-stop to the higher floors, while others cover the lower floors stopping at each floor as needed; or,
  6. use a differential charge for using the elevator, with higher price at peak-use times.”

After being given time to argue the merits of these possible solutions and put forth alternative options, we were surprised to learn the often implemented real-world solution: leaving the elevators themselves the same, and simply putting mirrors in elevator lobbies. Even though we had all waited in elevator lobbies that were walled with mirrors (they were all over campus), this idea had not occurred to any of us because we were attacking an entirely different problem than the one mirrors address.

We don’t always need to move more quickly. If we experience each moment as meaningful, then the pace of our actions becomes insignificant and the idea of “waiting” vanishes altogether.

The first three solutions try to fix the problem through brute force, attempting to increase elevator capacity or capability in a single stroke. The next three start to get a little more creative, attempting to cut down on demand or increase the efficiency of the elevator set-up, but they still approach the problem as one of insufficient elevator space to meet the demands of all the workers wanting to use them. Continue reading

Freakonomics and the Jevons Paradox

bulb-15629_1280Do Energy Efficiency Improvements Make Us Use More Energy?

I was quite intrigued this week by the latest podcast offering from Freakonomics. Aside from their somewhat insulting “discovery” that the study of the environment isn’t diametrically opposed to that of economics (a conversation for another day), they put forward an engaging analysis of the effectiveness of energy efficiency. Their discussion centered around the work of Arik Levinson, an economist at Georgetown University. The gist of Freakonomics’ argument, based on Levinson’s work, is that California’s 1978 residential energy efficiency regulations did not result in a decrease in per capita electricity use, and that the differences between energy use in California and other states can be explained by a particular manifestation of the rebound effect: the Jevons paradox.

The podcast chronicles Levinson’s research on the impacts of these building codes, which was recently published in a working paper by the National Bureau of Economic Research. For the study, Levinson analyzed data around California’s housing regulations in three different ways. He says it best in his own words:

First, I compare[d] current electricity use by California homes of different vintages constructed under different standards, controlling for home size, local weather, and tenant characteristics. Second, I examine[d] how electricity in California homes varies with outdoor temperatures for buildings of different vintages. And third, I compare[d] electricity use for buildings of different vintages in California, which has stringent building energy codes, to electricity use for buildings of different vintages in other states.  All three approaches yield[d] the same answer: there is no evidence that homes constructed since California instituted its building energy codes use less electricity today than homes built before the codes came into effect.

Continue reading

Six Years Later, Has Elkhart Learned?

Then-Senator Barack Obama makes his first visit to Elkhart, IN while campaigning for  his presidential run in '08. From Flickr, CC license.

Then-Senator Barack Obama makes his first visit to Elkhart, IN while campaigning for his presidential run in ’08. From Flickr, CC license.

A few days ago, NPR lead into its coverage of the State of the Union Address by putting up a retrospective on President Obama’s visit six years ago to my high school in Elkhart, IN. It was January, 2009, and Obama chose Elkhart as the first destination of his term in office because the town served as the begrudging poster-boy of the Great Recession. When Obama visited, the unemployment rate in Elkhart was 19.1% and it would go as high as 20.2% a few months later. The title of “Recreational Vehicle Capital of the World” did not do the town much good in an economic climate in which RVs were completely undesirable.  Six years later, as NPR chronicles, the economy of Elkhart has rebounded substantially, but is it any less susceptible to economic shocks than it was in 2007? Continue reading

The Parable of the Polygons: How Individual Decisions Create Large Collective Impacts

No, Lake Michigan Has Not Been Invaded by Little Shapes With Faces…

This blog and firm are based on the premise that a group of people making seemingly independent, individual decisions can have colossally large collective impacts to wreck or save the world; our decisions are often more important than we realize. Today I have a perfect illustration of how this can work. It has to do with the age-old question of what happens when you combine game theory, sociological theories of segregation, visualization, and little shapes with faces on them.

…You weren’t asking that? Well, I’m going to tell you anyway. The answer is “The Parable of the Polygons,” and it is nothing short of brilliant.   Continue reading

About the Portfolio: Predictors of Well-Being in High Income, Industrialized Countries and Their Related Effects

To kick off the blog, I plan on starting by explaining my portfolio of project experience.  The first item in this portfolio, chronologically at least, is my senior thesis from Purdue.  This thesis, titled “Predictors of Well-Being in High Income, Industrialized Countries and Their Related Effects,” earned me the Alan Hess Award as one of the top two graduating seniors in Purdue’s economics program. I won’t go into too much detail about the motivation behind the thesis, but I will just say that I have long felt that GDP is not such an adequate measure of the health of a country as it’s often made out to be, and this thesis was a response to the search for alternative measures of progress.

Thankfully, there is a growing movement to promote alternatives to GDP (Such as: the Genuine Progress Indicator, the Human Development Index, the Ecological Footprint, The Happy Planet Index, and Gross National Happiness), and many before me have given this movement ammunition by studying well-being at both personal and national levels.  A good synopsis of the breadth of research on this topic can be found in Alois Stutzer and Bruno S. Frey’s report here. It has been pretty widely established by now that the relationship between per capita GDP and a country’s well-being (as measured by subjective surveys) is logarithmic, that is, countries see dramatic increases in well-being as GDP initially rises, but each further increase in GDP brings about progressively smaller increases in well-being.  This makes sense; a five dollar bill is worth less to a millionaire than a beggar. The following chart from Ronald Inglehart (simplistically) further illustrates this transition: that after basic needs are met through economic growth, individuals do not see as much gain in well-being from improvements in income and “Non-economic aspects of life become increasingly important influences on how long, and how well, people live.” Lifestyle vs SurvivalAs a resident of a world where very few people have to worry about where their next meal is coming from, this economic-to-lifestyle transition feels very real to me.  Inglehart’s hypothesis seems true to my own life experiences, but I didn’t just want trust his word.   For my senior economics thesis, I decided to build upon this hypothesis and the research reviewed above, seeing what the data had to say to either confirm or deny what was instinctively true to me. Continue reading