Levitt explores the correlation between price and wine, expounding that it doesn't really exist.

Quoted: Stephen Dubner and Steven Levitt, authors of Freakonomics, keep the conversation going from their best-selling book that explores the hidden side of everything.

A great breakdown of the numbers involved in determining what a star player like Alex Rodriguez, means to an organization like the Yankees.

Quoted: The landmark $305-million contract should prove a sound investment because of Rodriguez's performance and marquee value. - Major League Baseball news

I love this type of analysis. Sometimes the simple improvements are right in front of you.

Quoted: Stephen Dubner and Steven Levitt, authors of Freakonomics, keep the conversation going from their best-selling book that explores the hidden side of everything.

An op-ed piece in the USA Today by economist Bruce Wydick.

Quoted: Our inability to think clearly about sunk costs is impeding our ability to make clear decisions about our involvement in Iraq. Failing to correctly identify sunk costs (those that are irretrievable), and deal with them properly, biases our decision-making in favor of prolonging the war.

I subscribe to the Economist and am bowled over with trying to keep up with all the weekly content.

Thanks to Kutta Dotting last week's "The Avuncular State," I paid special attention to that issue and article and it was well worth it. The article basically explores the various ways that governments have of "encouraging" behaviors that individuals would generally want for themselves but have a hard time actually doing. It's a little weird and I bristled at first. The article, however, makes some great points and is well worth reading.

A nice smart wikipedia entry on the economics term "sunk cost."

A little 1-pager about what we're learning through the economics of gaming. I've excerpted some of the salient quotes.

Quoted: What if everything in life were free? You'd think we'd be happier. But game designers know better: We'd be bored. ... Games make money by occupying time - grabbing eyeballs and holding on to them. The point of economic policy in a game isn't to simulate reality; it's to make the synthetic scarcity so entertaining that the truly scarce good - players' time - goes toward solving problems in the game, not in the outer world.

Quoted: STARE at something long and hard enough, and it will begin to swim before your eyes. Economists have been scrutinising America's current-account deficit for years now, and they are no closer to agreeing on what they are looking at. Now two economists at Harvard doubt whether the deficit even exists. Ricardo Hausmann and Frederico Sturzenegger first put this claim in a working paper* released last November. Your correspondent has blinked twice since then, but the claim has not gone away. On the contrary, it is gathering moss†. At the heart of the argument is a well-known paradox. In the mainstream view, America is now the world's biggest debtor. Thanks to its chronic trade deficits, it stood $2.5 trillion in the red at the end of 2004. And yet it still somehow manages to earn more on its foreign assets than it pays out to service its much bigger stock of debts: $36.2 billion more in 2004.

An interesting paper by some folks (Ricardo Hausmann and Federico Sturzenegger) from the Kennedy School of government which posits that the US may not be running the deficit we think that it is. They point to something which they call "dark matter" as the solution. I think that this solution is a little too convenient to explain away our trade deficit but I also believe that there is soemthing in here that we are not accurately accounting for. I have quoted the abstract for the paper. This is a PDF.

Quoted: Abstract - This paper argues that current account statisitcs may grossly mismeasure the real evolution of a country's net foreign assets. The difference may arise due to mismeasurement of FDI, as well as from unreported trade of insurance or liquidity services across countries. We suggest estimating net foreign assets by capitalizing the service flow and estimating the current account from the changes in the foreign assets so computed. We call 'dark matter' the difference between our measure of net foreign assets and that portrayed by official statistics. When we apply our methodology we find that the US has no current account deficits over the last two decades, and that global imbalances are relatively small and very stable. The exports of dark matter of the US appear to be fairly steady, casting doubts on the need of a major readjustment of the US dollar.