Thursday, September 11, 2008

The Economist: August 30th - September 5th

I'm a week behind with The Economist, but last week's had some fun topics that I ran across a few nights ago:

- A great bit on the tendency for the best strategic, less luck-driven "Eurogames" to come from Germany. The Economist describes them as "emphasis[ing] strategy over showiness, downplay luck and conflict, lean towards economic rather than martial themes, and strive to keep all the players at the table until the game's end." Puerto Rico and Settlers of Catan both hail from Germany, and two significant games awards as well.

- It's been mentioned before, though I don't think here at TPS, but restaurants must now post the caloric attributes of the foods they sell. Sweet crispy Christ, this outflanks smoking bans on every margin. It's your typical regulation-yields-competition-on-other-margins story, but don't let the crafty entrepreneurs stray your eyes from the big picture of loss here.

- I'd love to hear Dana's take on this one: Lawyers are going away from the billable hour. Understandably, the push is coming from clients-- incentives simply aren't there for the best service if each hour or fraction thereof is pay at value. That just encourages lawyers to bill more hours. (ABB! Always be billing!) Instead, companies are experimenting with flat fees and bonuses for tangible improvements on the legal end of things.


Dana said...

Getting away from the billable hour is a positive thing. Basically it should be a flat fee service or some other model that isn't determined by hours because that isn't an indicator of quality. There is also no motivation to increase productivity or work "smarter" because you aren't rewarded for that - only for billing as many hours as possible. I hope to see this trend continue, even if it does mean a bit of shrinkage in the number or lawyers firms employ.

Thomas said...

What's the big picture of loss for posting calorie info?

Matt E. Ryan said...

You work for a law firm, whereby (large) companies often employ their own legal department. I'd presume lawyers for large companies are salaried employees for the firm, no? As such, they don't have billable hours, right?

I think the example in the linked article was for Tyco hiring an outside firm-- the exact kind of principal-agent problem that would be helped with a flat fee and bonus arrangement.

Matt E. Ryan said...

"What's the big picture of loss for posting calorie info?"

Costs in changing all the menus, costs in figuring out the caloric content of all your food, forming agencies to make sure everyone following the new regulations.

Plus I'm going to go with the psychological cost imposed on people who were happy without knowing the exact number of what they were taking in. And don't go all Nudge on me and say that this pushes people towards a better place since they can't figure it out for themselves-- clearly, for those who care that much about calories have already pretty much pegged a calorie value for everything they eat anyway.

And that's what it really comes down to-- people who care about this calorie stuff probably already have a good idea; we're only informing those who don't have much of a preference.

Thomas said...

I'm gonna claim the Nudge thing anyways, since I've experienced it personally (i.e., I've made different choices based on the caloric information posted).

Cost of menu changing is probably minimal since prices change regularly.

Cost of monitoring is probably minimal since there are regular food health inspections anyways.

Cost of calculating calories should be zero, since I think all fast-food companies are currently required to provide the info on request. Unfortunately, this request is in the best case a binder hidden somewhere in the restaurant, and is in the worst case a USPS address you have to write to. This is almost a case of just better enforcement of an existing law.

Don't confuse "not having much of a preference" with "having a large enough opportunity cost that you don't bother finding out caloric info"

Justin M Ross said...

Settlers of Catan (especially its Cities & Knights expansion) is a far superior gameplay than Peurto Rico, but the set-up and playing time costs of Peurto Rico are much lower. You can get through a game in Peurto Rico in less than 30 minutes, easily. Settlers is likely to be an hour at the least. In both, wealth is produced, which is nice, as opposed to Monopoly where it is transferred. However, Peurto Rico doesn't allow you to trade with your competitors, and it has the unfortunate fixed shipping size that has a zero-sum element to it.

Matt E. Ryan said...

Well, Monopoly just has weird aspects too-- we build more houses and the price goes up?


Of how much importance can caloric information be to you if you didn't care to look into it before? Granted, when the information is in front of them, people can make better choices, but that belies the fact that information is costly-- and those that choose to pursue it value the changes that could come from taking the time to figure everything out.

Preferences, after all, are a function of your opportunity cost of acquiring the information. I may really love Southeast Vienamese fried dog, but how much of an effort would it be for me to figure that out? And how much expected benefit do I really get from knowing that?

And you'll make Greg Mankiw mad with your menu cost comment!

Marginal cost of monitoring could be low-- though I can't say I've heard regulation justified by saying that since we've already got an infrastructure of regulation established, we might as well do a little more.

I think the cost of calculating isn't just for fast food, it's for all food places. Do you just add up the calories in the ingredients? Further, the authorities would need to do checks this somehow-- else the law would not be enforced-- and at some point down the line, some sort of chemical verification would be needed, yes? I have no idea how to figure the number of calories in food. None at all.