Income Inequality and Human Nature

An interesting read from yahoo finance. Most of the arguments should seem familiar: gini indices and crime rates. However, this bit was interesting and a bit surprising:

There's a very interesting strain of economic research showing that our sense of well-being is determined more by our relative wealth than by our absolute wealth.

In other words, we care less about how much money we have than we do about how much money we have relative to everyone else. In a fascinating survey, Cornell economist Robert Frank found that a majority of Americans would prefer to earn $100,000 while everyone else earns $85,000, rather than earning $110,000 while everyone else earns $200,000.

Think about it: People would prefer to have less stuff, as long as they have more stuff than the neighbors.

I suppose it is important to remember that economics is greatly impacted by psychology.

Things To Do With $100 Billion

The following thoughts originated while discussing a completely different matter with Prof. Hsu at his blog.
As per census.gov there are about 1.2 million k-12 teachers in the US. We could give each of them a $50k salary increase and have $40 billion left over to provide whatever other needs schools have which would yield about $400k for every school (I estimate there are ~100k schools in the US).

Alternatively, we could give every one of the 7.1 million college students who receive financial aid a $14k break on their loans.

We could also do something for people who can't afford health insurance, or treat war veterans better, or many other decent things. Unfortunately, our priorities are not such. Granted the $100bn price tag is payable over the course of a few years, but any of the aforementioned causes would benefit greatly from the money disbursed over that period of time.

Waterrant @ 'The Bistro' No more!

Yup. He left. Luckily, this doesn't mean that he'll stop blogging, for his blog is a true gem. I can't wait until the book is published, though I fear it isn't going to be as good as the blog.

Mass Predictions

An interesting article on obtaining a pool of 'experts' making predictions for you. See related post here. It seems that ProbabilityFootball has successfully done what I was talking about in that old post. The most remarkable thing:

Even when we average together the very worst participants — those participants who actually scored below zero in the contest — the resulting predictions are amazingly good.

It seems that it would be worthwhile to try something like this on the stock market. However, it would probably be a lot harder to get people making predictions about the stock market since not so many would care. Also, I keep thinking that with football it is more reasonable that people do well because they can make educated guesses which is harder to do for the stock market. I wonder how educated the pool of 'experts' needs to be in order to produce decent results. Heck... I might even try to do it...