Bardonomics

Image: winteamb In Hong Kong, horse racing is nothing less than an institution. Every year, the Hong Kong Jockey Club conducts over 700 races, bringing in upwards of HKD 100 billion in betting turnovers. This makes the betting market ripe for some economic analysis. In this post, I will be investigating whether the market upholds the conditions for efficiency and rational behaviour. Economics, of course, assumes that human behaviour is consistent and rational.  This blog has scrutinised this assumption previously, but this analysis will be done with specific reference to data from horse racing in California and in Hong Kong. The findings that inspired this blog post come from California (refer to "Further reading" below).  To determine whether the betting market in Hong Kong displayed similar results, I analysed over 50,000 non-unique horses in more than 4,000 races spanning a six-year period from 2010 to 2015. (A detailed report on that analysis is in progress.) ...

Figure 1 Following nearly every major sports event and music concert there's an obligatory newspaper piece lamenting the damage done by ticket touts and scalpers. These individuals, it is contended, harm ordinary concertgoers and sports enthusiasts by taking advantage of the limited ticket supply to resell at inordinately high prices. Laws regarding ticket resale vary around the world; in Hong Kong, the government places an outright ban on reselling a ticket at any price above its face value. Although such measures tend to have popular support, they are perhaps economically misguided. Ticket reselling is an activity that allows the market to "clear"—that is, reach an equilibrium between supply and demand. Suppose, as in Figure 1, that the event organiser sets the ticket price at Ps. Then, the intersection between the demand curve and the price occurs at Qd. This intersection represents the quantity of tickets that consumers will demand at the original sale price....

There are few assessments as confusing as self-assessments. Is my performance in class at an A, or at a B?  Am I 'exemplifying' the 'Learning Habits' expectations, or merely 'meeting' them? What is that even supposed to mean?  As if those questions aren't hard enough to answer, there's also the concern about how your teacher will view your assessment of yourself. Some fear that modest self-evaluations may result in a lower final grade by skewing the teacher's thought process toward an unfavourable judgement. Yet going the opposite direction, and grading yourself generously, is also perceived to be harmful. One of my teachers notably quipped that self-assessments are 'a great way to find out who's delusional!' So, should you evaluate yourself conservatively or should you give yourself the benefit of the doubt? Worry no more, for a finding from behavioural economics may hold your answer. It's called anchoring, and don'...

Fast food workers on strike in Richmond, VA. Image: Bernard Pollack In today's world of rising inequality and decreasing social mobility, there are few economic issues as contentious as that of the minimum wage. There have long been loud voices arguing on either side; interestingly, both those who are for and against an increase maintain that they hold the best interests of the poor. Recently the tide has favoured those advocating for a higher minimum wage. This is particularly true in the United States, which has a lower minimum wage than most developed countries. Those who support a higher minimum wage assert that it is an effective way to improve the plight of the growing ranks of the working poor, people who often work multiple jobs but remain beneath the poverty line. Many demand that a 'living wage'—a wage high enough to maintain a normal standard of living—be instituted. They say that a living wage is the only way to ensure wellbeing for workers in a labor mar...

Image: Washington Post   Up, up, and up, with not a glance below. In just 12 months, the frenzied Chinese stock market gained a staggering $6.5 trillion in value. Many sold their homes, quit their jobs, and took loans in a manic effort to join the invincible bull run. Less than 12 weeks since, trillions of dollars in stock market value has evaporated in a precipitous slide that is spooking investors around the globe.  Following close to half a decade in the doldrums, the Chinese stock market took off spectacularly in the summer of 2014. Shares were being traded higher and higher with unrelenting pace. Nascent companies with paltry profits staged wildly successful equity offerings. One tech company, Beijing Baofeng Technology, saw its shares rise 17-fold in just 26 trading days.  Worryingly, the rally showed no signs of slowing even as the economy progressed sluggishly. With the steep ascent looking excessive, the government should have made an attempt to h...

Image: Youkai Chou It's a happy day. Through some divine stroke of luck you have found yourself with two free tickets to the Rugby Sevens / insert-event-you-want-to-attend. What should you do? Is it a better idea to sell your coveted tickets to the highest bidder or to take along a friend and have a good time? What's a reasonable way to think about this decidedly pleasant dilemma?  Homo economicus , the imaginary friend of every economist, may have some advice for you. So who is  Homo economicus ? He is the relentlessly optimising, perfectly rational, purely self-interested character   who serves as a model for human behaviour. Numerous core economic theories are formulated through the study of how this creature would behave and interact under certain conditions. Fortunately, for economists and everyone else, humans are indeed often rational actors. For instance, the central economic tenet that, all other things being equal, an increase in th...

Image: Bloomberg There is a famous Greek myth about two sea monsters, Scylla and Charybdis. It is said that they lived on opposite ends of the Strait of Messina, terrorising ships that attempted to pass. If any vessel attempted to avoid one of the monsters, it was certain to be destroyed by the other.  Today, that legend is encapsulated in the saying "between a rock and a hard place."  Athens now finds itself in a somewhat analogous predicament. By the end of this month, Greece must repay the International Monetary Fund (IMF) $1.7 billion in loans. Additionally, in July and August the country is due to pay the European Central Bank (ECB) nearly 6.8 billion euros ($7.6 billion). Greece does not have the funds to honour those obligations. Crucially, the European Commission is refusing to release 7.2 billion euros in bailout funds unless the Greeks agree to additional fiscal austerity measures. If Greece is unable to repay its debts, it faces expulsion from the...