Jul 252016
 

Apparently people who use online dating websites are richer, taller, thinner, and better looking than the average person. At least, that’s what they write about themselves. ūüėõ¬†Hey, who would’ve guessed?¬†But how¬†honest are people really when it comes to sharing their personal information on dating sites?

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Some women approaching 30 seek a¬†man-date to get married.¬†But they have to be careful about who they choose. Maybe¬†dating a tennis player would be a ball, but it could also¬†turn out to just be a racquet. ūüėܬ†Besides, tennis players aren’t even¬†romantic because Love means nothing to them.¬†ūüé嬆Since we live in a digital world, online dating can be a legitimate way for people to meet each other. So let’s see what the landscape looks like.

The Economics of Online Dating

A study focusing on over 20,000 active users of dating sites in the United States is outlined in the book Freakonomics. About 4 out of 100 users (4%) reported they earned over $200,000 a year. But only about 1% of the U.S. general population is making that much so either government statistics are wrong or 3 out of the 4 users were inflating their earnings.

Both men and women tend to report as being an inch taller than the national average for their genders. But in terms of weight, men were in line with the national average while women apparently weighed 20 pounds less than the national average.

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Online dating¬†users are typically really good looking. About 70% called themselves “above average.” 30% chose “average.” Roughly 1% said their looks were “less than average.” How humble. ūüėí ¬†So either most people with online dating profiles are genuinely more¬†attractive than average or they have an overinflated view of their appearances. Of course make up and Instagram filters can alter the way we look.

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28% of women said they are blond, which is a number much higher than the national average, which indicates either dyeing or lying. A¬†man who does not include a photo gets 40% less attention than a man who does. Meanwhile, a woman who doesn’t include her photo gets 76% less attention. Even a¬†low income, poorly educated, unhappily employed, not very attractive, slightly overweight, and balding man but who includes a photo with his profile stands a better chance of receiving messages from women than a man who says he makes $200,000 a year and is deadly handsome but does not have a photo. I guess people just want to see the goods. Just like posting an ad to sell a car, if there’s no picture then potential buyers will think there might be something wrong with the car.

How To Get Results with Online Dating

This is why economics is so cool. We can take all the data collected and come up with a winning formula to give us the best odds to achieve our goals. Below are step by step things you can do to increase your chances of getting a date. ūüôā

For men, looking for a woman. 

  1. Be white
  2. Be tall
  3. Be rich
  4. Be ready to commit
  5. Be a doctor, lawyer, or go join the military

That’s all there is to it guys! ūüėÄ You can exaggerate your height and income to appear tall and rich, and use whitening cream or makeup to look white if you aren’t already, lol. Asian, black and Latino men receive fewer messages in general than white men. White women in particular reply to white men twice as much as they reply¬†to black and Latino men. Asian men receive fewer than 25% as many messages from white women as white men with the same levels of income and education. Men who say they want a long term relationship do much better than men looking for an occasional lover.ūüíú¬†

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Jul 142016
 

An Economy Based on Resources

Our¬†current economic system can use some¬†improvement. The government’s manipulation of currency, deficit spending, and bank bailouts are among many of the controversies that we have to deal with in modern times.

But I recently found out about¬†an organization called the Venus Project that aims to replace the society we currently have with¬†one that’s based on computer driven central planning. In this new hypothetical economy money doesn’t exist.¬†ūüė≤¬†The system¬†will revolve around resources instead. The idea is that all the resources in the world belongs to everyone. And the way resources are used up and distributed is by a computer program. Right now we have enough food¬†in the world to technically feed everyone, but poverty and hunger still exist. This new system would solve those kinds of social economic problems. A central artificial intelligence would¬†keep track of all the oil, timber, fish, and other goods available, and it would manage the production and distribution of stuff in the most efficient and environmentally sustainable way so that everyone would have enough. In such an¬†economy that is based on resources, there would be no use for money. ūüėē¬†The Venus Project also claims it will shorten the work day and raise the standard of living higher than what most people realize is possible.

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Although I agree that the status quo needs to be challenged I don’t think the¬†Venus Project is the right solution. In fact, I¬†don’t think its proposition is¬†even possible at this time. There are a lot of concerns¬†about the project that have yet to be addressed. Personally I don’t understand how an economy can even function without a price mechanism.

Money¬†doesn’t just simplify life.¬†It also bolsters stability in a market so we can budget in a predictable fashion. ūüôā¬†Money can be anything as long as most people accepts it as a medium of exchange.¬†It can also be used as a store of value.

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Jun 302016
 

Brexit Raises Risk of Global Recession, Maybe

After Britain voted to leave the EU last week stock markets around the world became very volatile. Two days after the vote¬†$2.5 trillion were wiped from the world’s markets.ūüėĪ To put that into perspective that’s roughly the¬†entire annual economic productivity (GDP)¬†of the United Kingdom.

George Soros, the investor who warned of a 20% devaluation in the British pound now warns the Brexit has ‚Äúunleashed a crisis similar to the financial panic of 2007 and 2008.” He says that a hard landing in China is ‚Äúpractically unavoidable.‚ÄĚ And he is not alone. Most news sites say the¬†Brexit fallout will continue to ripple across¬†the world and put not only Britain but also the U.S. and other countries back into recession.

These commentaries¬†are often portrayed¬†as conventional wisdom, but that doesn’t mean they are necessarily true. In fact, news predictions are often¬†wrong. One day in 1987 stock markets around the world crashed starting in Hong Kong and spreading to Europe and then to North America. The Dow Jones index in the U.S. lost more points in a single day than any prior trading period. This historic event was known as Black Monday.¬†Many analysts and publications at the time warned it was only the beginning of a bear market and that more turmoil would come. A lot of people believed the hype and got out of the market because they were afraid. But those investors didn’t do their own risk assessment. Today, Black Monday is nothing more than a small, insignificant blip in the historical stock market chart. (circled in red below)

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The way we perceive risk is¬†not always rooted in reality. An article in the Chicago Sun-Time features a study that demonstrates how conventional wisdom can lead people to the wrong conclusions about risk.¬†Imagine an 8 year old girl has¬†2 best friends who both live close by but in different homes.¬†The first¬†friend’s parents keep a gun in their home.ūüĒꬆThe other friend’s household doesn’t have a gun¬†but does have a backyard swimming pool.¬†ūüŹä

If you had to choose, which is the safer house for the little girl to go play in?¬†ūüėĀ

Without any other information most parents¬†would probably think the¬†second friend’s house is safer¬†because guns are perceived to be more dangerous¬†than swimming pools.¬†But in a country such as the United States, there are about 6 million swimming pools, and 550 children under ten years old drown in them each year. However¬†out of roughly 200 million guns in the U.S., only 175 children die each year from guns. In other words, the risk of the girl dying by a pool (1 in 11,000) is much higher than dying by a gun (less than 1 in 1,000,000.) According to the study’s author, most people are “terrible risk assessors.” We often let irrational fears cloud our judgement.

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Jun 202016
 

UK’s Upcoming EU Referendum

The United Kingdom will hold a historical referendum later this week to let¬†its¬†people decide if it should remain in the European Union or not.¬†There are a lot of issues driving the debate in Britain including immigration, sovereignty, defence, etc. But the financial factors are the most interesting to me so let’s break down some of those. ūüôā

Advocates for Britain to exit the EU, or a “Brexit” scenario, argue that the EU is holding back Britain’s potential for international trade. If Britain leaves¬†it will¬†be able to make free-trade agreements more easily with India and China, which it doesn‚Äôt have yet due to current EU regulations.¬†On the other hand, more than 40% of Britain’s exports go to other EU countries. Putting up barriers between its largest trading partner could hurt Britain’s exports.

There are about 3 million jobs in the UK that are linked to the EU. Leaving the EU could put some of these jobs at risk. But at the same time it may¬†also create new opportunities for businesses to grow and hire since the UK could incentivise investments through low corporate taxes under it’s own policies.

London is a large financial hub. But some believe if Britain leaves the EU,¬†it will lose the trading advantages of being in a larger market. Britain’s¬†economy may¬†suffer which could force financial institutions to leave the UK and the iconic city of London. But the Brexit camp says that due to low tax rates, banks of all types will still want to be headquartered in Britain. Speaking of banks, I’m not sure¬†how many kidney banks are in the UK, but I know there is only one¬†Liverpool.ūüėÜ

Similar to federal transfer programs in Canada and the U.S. The European Union subsidizes its financially weaker economies with the money from other members. According to the BBC, the UK contributes ¬£8.39 billion ($12.3 USD) each year to Brussels for the EU budget. This figure is net contributions, after subtracting rebates and receipts back from the EU. Britain¬†would not have to pay this anymore if it exits. In the few¬†minutes it takes a person to read this blog post, Britain will have paid another ¬£50,000 to the EU in membership fees alone. ūüėē

Norway and Switzerland are not part of the European Union, and they have lower unemployment rates than both the UK and the average of the 28 EU countries.

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But who knows. Maybe it’s just a coincidence, and doesn’t have much to do with how they make their own labor and economic laws that work best for their own people¬†instead of following rules made all the way in Brussels.

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May 122016
 

Bar Stool Economics

Capitalism in¬†the United States¬†is in serious disrepute. The Bush tax cuts have been said to give the top 0.1% of Americans an average of $520,000. That is over 400 times the average tax cut received by¬†middle-class households. Many people are upset at how tax cut policies seem to disproportionately benefit the upper class. If anything, shouldn’t tax breaks help the poorest people? ūüėē Well to understand how the tax system works let’s take a look at bar¬†stool economics.

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The origins of this parable have been attributed to Professor T.Davies from the University of South Dakota and R. Kamerschen from the University of Georgia. The following is a modified version of the original.

Suppose 5 friends go out for drinks and the total bill comes to $100. If they paid their bill the same way we pay our taxes, in proportion to income, then it would go something like this:

  • The first 2 men, the poorest, pay nothing.
  • The 3rd man pays $4.
  • The 4th man pays $19.
  • And the 5th man, the richest, pays $77

The 5 men are happy with this payment arrangement so that is what they decided to do. ūüôā Then one day, drinks at the bar were¬†on sale, and the total bill for the 5 gentlemen came to $80. To make it fair the men still wanted to pay their bill the same way taxes are paid. So the bartender reduced each man’s bill by roughly the same amount based on their economic status. The first 2 men were unaffected because they simply continued to drink for free. The remaining 3 patrons split¬†the $20 in savings, and paid the following amounts:

  • The 3rd man paid $2 instead of $4 (50% savings)
  • The 4th man paid $14 instead of $19 (26% savings)
  • And the 5th man paid $64 instead of $77 (17% savings)

Each of the paying 3 men spend less for their drinks than before. And the first 2 men continued to drink for free. But once outside the bar, the men began to compare their savings. “I only got $2 out of the $20 in savings,” complained the 3rd man.¬†“Don’t look at me,” replied the 4th man. He pointed to the 5th man and said, “he received the majority of the $20 savings. The wealthy get all the breaks.”

“Wait a minute,” yelled the first two poorest men who didn’t pay. “We didn’t get any savings at all. *harumph* The system always exploits poor people like us.”

Similar to wine tasting, the discount for the men can be seen as good or bad depending on their mental frame of reference. The first 4 men ganged up on the 5th man and patronized him for being too greedy. Then they¬†went to a¬†Bernie Sanders rally without inviting their rich friend. ūüėõ Feeling betrayed and ostracized the 5th man didn’t show up to the bar the following night. The 4 remaining men decided to drink without him anyway. But when it came time to pay they discovered an unpleasant surprise. They didn’t have enough money between all of them for even half of the bill. ūüôĀ It appears they were in a bill pickle. ūüėÄ

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