Market Power

Where is the GPS Technology Going?

Glenn Reynolds has a post today illustrating what happens in a market that experiences a decrease in demand.

ANOTHER ONE-DAY GPS Sale. I wonder if they’re marking these things down so aggressively because of competition from GPS-equipped smartphones?

UPDATE: A reader emails:

Yes, the influx of GPS enabled phones with navigation is driving down the prices of navigation only devices. I can contest to this as I work for NAVTEQ – the maker of the map that 80%+ of the devices use for their map data. We have seen a press from our customers(verizon, sprint, nokia, etc) to include more ‘mobile’ friendly data that presents itself better on a phone rather than a widescreen navigation system.

I bought a Garmin GPSMap CSX60 hand-held GPS for geocaching last fall.  I was surprised that what many consider the top of the line hand-held unit came out in 2006.  Surely with all the improvements in technology since then, a better hand-held has come out since then.  Apparently not, and my guess is that's because the newest GPS technology is being put into smartphones and, as you'd expect, that's being shown in prices.

I have a Droid Incredible which, apart from it's crappy battery, is incredible.  I especially like the ability to speak my destination into the phone's microphone and having Google's navigation software be able to plot my directions.  It's obviously a lot safer than trying to tap in a destination while driving and it's more convenient than pulling over to the side of the road to enter the destination. 

Also, I like my phone's tracking software which allows the user to record walks, bike rides, drives, etc. and be able to calculate distance traveled, elevation changes, etc.  This weekend I went camping in Whitewater State Park in SE Minnesota and I took my phone with me on a hike to use the tracking software.  I also brought my Garmin.  But while I used my phone to check my tracks, radar, email, etc. my poor Garmin spent the hike in my pocket.

Economic Impact Statements

The economic impact statements written by consultants for sports subsidy seekers describe research that goes something like this:

Assume that the total amount of direct spending that will happen if, say, a stadium is built is X and the multiplier is M.  The total of direct and indirect spending that will therefore occur is X*M.  There are similar multipliers for jobs and the process of calculating a jobs number is exactly the same as in the expenditure calculation.

One problem with this type of study is that it makes use of assumptions about the future which may or may not be rooted in historical fact.  But that's not a fatal problem even though making assumptions about the future is always going to involve some sort of forecast error (as the good folks in Kansas City are finding out the hard way (Via Eric Parsons)). 

The fatal problem with this type of research is that there is nothing to compare it to, no control group.  It's like running a research trial on a new drug with no placebo.  If everyone in the drug study gets better, how do we know it's the drug and not something else?  Because of the lack of a comparison group, such studies should be looked at with skepticism, even when a respected economist/government advisor performs the study.

It may be that the last people in America who believe that the $862 billion economic stimulus of February 2009 created millions of net new jobs are Vice President Joe Biden and the staff economists in the White House. Yesterday, President Obama's chief economist announced that the plan had "created or saved" between 2.5 million and 3.6 million jobs and raised GDP by 2.7% to 3.2% through June 30. Don't you feel better already?

...All of these White House jobs estimates are based on the increasingly discredited Keynesian spending "multiplier," which according to White House economist Larry Summers means that every $1 of government spending will yield roughly $1.50 in higher GDP. Ms. Romer thus plugs her spending data into the Keynesian computer models and, presto, out come 2.5 million to 3.6 million jobs, even if the real economy has lost jobs. To adapt Groucho Marx: Who are you going to believe, the White House computer models, or your own eyes?

Or, as Milton Friedman used to say, "there's no such thing as a free lunch." The money government spends does create some jobs—the folks working on road projects, say—but that money has to come from somewhere, which means taxing or borrowing it from areas of the private economy that are nearly always more productive. This doesn't mean that government spending is always a bad idea, but it does mean that government spending as economic stimulus is fanciful.

The same goes for government subsidies for sports.  If a sports project is so good for an economy, why does it need government help to get started?  There should be plenty of private interests lining up to get a crack at such a great investment.

Income Taxes and Sports

"Fouled by the Taxman"

"If LeBron James goes to the Miami Heat instead of the Knicks," the Post noted gloomily on July 1, "blame our dysfunctional lawmakers in Albany, who have saddled top-earning New Yorkers with the highest state and city income taxes in the nation, soon to be 12.85 percent on top of the IRS bite. There is no state income tax in Florida." Consequently, a five-year, $96 million contract (the estimated deal he could get in either city), would cost James $12.34 million in New York taxes, but nothing in Miami (though he may be taxed when he plays in other cities). "Quite a penalty for the privilege of working in Midtown."

If athletes do pay attention to relative tax rates, than we should see more talent being drawn away from high-tax areas to low-tax areas.  This should drive sports teams in low tax areas to win more often than those in high tax areas, all else equal.  Off the top of my head, I'm not aware of any studies that have explored this hypothesis.  Unfortunately, I don't currently have access to EconLit so I can't do a search of the AEA paper database.  A Google search on "income taxes" "competitive balance" didn't produce any results that I was looking for.  If not, I think it would make for an interesting research project.

Via Yann commenting on my TSE post on how relative tax rates steered LeBron James away from his home state of Ohio to the sunny beaches of Miami.

New Regulations on Cribs

Via CNN comes a story about new crib regulations that will label drop-side cribs, like my sons had when they were babies, unsafe.  This stinks for consumers, but guess who's dancing in the streets.

"If you are a crib company, at this point you are probably dancing ... because of the various effects of this law," said (PM-US Product Safety Commission commissioner Anne)Northup. "While companies certainly will lose current inventory that does not meet the new standard, they will also reap tremendous financial rewards since every family and day-care center in the near future will be forced to purchase a brand-new crib."

The limits of behavioral economics.  Like Keynesianism, behavioral economics gives a reason for politicians to meddle in our private lives.  As an economist, I think it is an interesting and useful criticism of mainstream neoclassical economics.  But I'm less enthused about using it as a policy vehicle.  Via Doc.