Guinnessometrics

The Guinness Brewery celebrated its 250th birthday this past Thursday, September 24th. In its honor, economist Stephen Ziliak wrote an aricle, "Great Lease, Arthur Guinness—Lovely Day for a Gosset!" (pdf) for a special issue of the Journal of Wine Economics entitled "Beeronomics." The article is a profile of Guinness brewer William S. Gosset, better known to economists and statisticians as "student" a pseudonym that became famous as Student's T-test, a widely used test for statistical significance. The story is fascinating, especially since Gosset was trained as a chemist but learned stats on his own.

For more coverage see the FT and Economist's View.

Obligatory Homer quote: "Beer... Now there's a temporary solution."

Kiva's Lending

More Kiva news, this time looking at what factors affect lending times. Johnny Price at Kiva put together the excellent slide show below, and a few findings follow after the slideshow.

What factors affect loan funding times

View more presentations from kivamicrofunds.

Some of the early conclusions are:

• Single entrepreneurs are funded relatively more slowly than group loans
• On average, the length of the description does not appear to affect funding time, although the "quality" of the description does
• Entrepreneurs that look affluent seem less likely to be funded quickly
• Lower partner risk ratings do not appear to deter lenders
• The quality of the photo does not appear to have a significant effect on funding time, but the inclusion of a video does speed up funding time
• And smiling helps :)

For more see Johnny's post on Kiva's blog.

Kiva Gets Yet Another Endorsement

Via @mattflannery.

"Business Owners Smile More Often"

According to a new Gallup survey of occupational happiness, small business owners have the highest overall level of well-being. From Gallup's press release:

The high well-being of self-employed business owners is particularly interesting in light of recent findings that business owners work longer hours than do people in any other occupational category. Their high well-being, despite working longer hours, supports Gallup research showing that working long hours is only highly detrimental to well-being for those who are less engaged in their work. In terms of income, business owners, on average, make slightly less than professionals and managers/executives, but still eclipse these groups in well-being. The three occupations highest in well-being are, in fact, those with the highest household income.

Additional coverage in the WSJ. This seems to mesh with Scott Shane's work showing that many entrepreneurs are motivated to start a business simply because they don't want to work for anyone else. While overall they may not form high growth firms, they fare well financially and enjoy being their own boss.

The rest of the results:

The Prius Effect

Constent with the previous post: "Chance a U.S. household that owns a Prius also owns an SUV: 1 in 3."

From Harper's Magazine (HT). An alternative and more positive story is that people used to have an SUV and then buy a Prius and garage the dirty, evil SUV - or more formally we would want to know the conditional probability of owning a Prius/hybrid vs. a non-hybrid, given that the first car a family owns is an SUV. I am not sure which effect dominates.

When Green Consumption is Bad

Dan Ariely writes about the Prius effect (Technology Review):

When University of Toronto researchers Nina Mazar and Chen-Bo Zhong recently looked into the topic, they found that exposure to green products can under certain circumstances license us to act imorally.

Through a series of experiments, Mazar and Zhong drew the following distinction between two kinds of exposure to green: When it’s a matter of pure priming (i.e., we are reminded of eco products through words or images), our norms of social responsibility get activated and we become more likely to act ethically afterwards. But if we take the next step and actually purchase the green product (thereby aligning our actions with our moral self-image), we give ourselves the go-ahead to then slack off a little and engage in subsequent dishonest behavior.

The Policy Views of Economists

A survey of AEA members, in the Econ Journal Watch (pdf).

The results show disagreement on many issues but evidence of considerable agreement on others, including a consensus that the benefits of Wal-Mart stores typically outweigh their costs, that Americans save too little and that economic growth in developed countries increases well being. The survey finds a consensus in favor of eliminating trade barriers, eliminating or cutting ethanol subsidies, allowing payments to organ donors, and against requiring employers to provide health insurance.

Green Bubbles?

From Time (Why the Solar Industry is Struggling):

Last summer the future of the solar industry looked bright. Demand was high thanks to generous government subsidies, and solar stocks were soaring. But now it resembles a classic bubble. The solar industry overbuilt and is now struggling under the weight of excess capacity and falling prices.

Then there's Hawaii (NYT):

With the most diverse array of alternative energy potential of any state in the nation, Hawaii has set out to become a living laboratory for the rest of the country, hoping it can slash its dependence on fossil fuels while keeping the lights on.

Every island has at least one energy accent: waves in Maui, wind in Lanai and Molokai, solar panels in Oahu and eventually, if all goes well, biomass energy from crops grown on Kauai. Here on the Big Island of Hawaii, seawater is also being converted to electricity.

As with other technologies, in the long-run cheap prices will drive adoption by consumers looking to reduce costs, so I take the fall in prices as a generally good thing, reflective of increasing scale. In the short-run the glut will probably be short lived as governments around the world prepare to increase their consumption of alternative energy sources.

Open Innovation

Berkeley's Center for Open Innovation put up their speaker series for the fall just a bit ago. Hank Chesbrough kicked off the series. There are no links to papers or topics for the fall, but there are videos and links to presentation materials from the Spring 2009 speaker series, so at least check those out.

For a quick primer on open innovation see Chesbrough's short article in Technology Review.

Thank God it's Thursday (TGIT)

Last year Utah became the first state to mandate a four day, 40 hour work week for most of its government employees. Time magazine addresses a number of benefits from lower energy costs for both the state and its employees to much higher job satisfaction. A few other benefits:

The advantages of a so-called 4-10 schedule are clear: less commuting, lower utility bills. But there have been unexpected benefits as well, even for people who aren't state employees. By staying open for more hours most days of the week, Utah's government offices have become accessible to people who in the past had to miss work to get there in time. With the new 4-10 policy, lines at the department of motor vehicles actually got shorter. Plus, fears that working 10-hour days would lead to burnout turned out to be unfounded — Wadsworth says workers took fewer sick days and reported exercising more on Fridays. "This can really make a difference for work-life balance," says Jeff Herring, Utah's executive director for human resources.

Phelps on Innovation

Howard R. Vane and Chris Mulhearn interviewed Nobel Laureate Edmund S. Phelps at the 2009 AEA meetings. The discussion did not turn to entrepreneurship, but there was this bit on innovation:

VANE and MULHEARN: Does academic knowledge largely progress through the lead taken by a small number of creative innovators?

PHELPS: That’s such a good question. It resonates with a subject in the area of innovation theory. The old guys like Arthur Spiethoff thought that progress was due to the great discoveries of the scientists and navigators. Schumpeter (1934) didn’t depart altogether from that, he simply said, well, that’s right but you’ve got to have some entrepreneur to actually implement it. But don’t think there’s much creativity there—everybody knows what’s in the air. And it’s very rare that anything new really gets created in the course of this development work. But now we don’t think about innovation in that way so much. We recognize that once in a while there is a big leap which creates the ground for a surge of innovations to follow. Nowadays we realize that an awful lot of innovation just comes from business people operating at the grass roots having ideas on the basis of what they see around them. Nothing to do with science—it’s just creative mankind chipping away at things.

I know that the Sens and the Mundells and the Lucases are towering figures,but they couldn’t have become so if they hadn’t read a lot of papers by, well, pretty average people who are just doing a good job of exploring a question and giving inspiration. I guess the towering figures are people with just a little more drive, a little more imagination, just a little cleverer in putting some things together. In other words, I don’t know the answer to the question [laughter].

All around a fascinating interview, with a focus on economic growth and the micro-foundations of macroeconomics.

The paper appears in the Summer issue of the Journal of Economic Perspectives. (Ungated PDF)

Age and Entrepreneurship in France

The Time article about the auto-entrepreneurship program we just talked about also contained some interesting information about age:

So far, two-thirds of that group are men, aged 40 on average. About 33% are salaried employees starting up a sideline business, 25% are unemployed and 6% are retirees.

This shouldn't be surprising given research from the Kauffman foundation and Scott Shane, but it remains a hard pill to swallow for many.

France Gets Entrepreneurial

I resisted putting a question mark in the title, but I was surprised to read this (Time):

Could the French fondness for a single job for life be giving away to a new spirit of entrepreneurialism? The number of new private businesses launched in France is soaring. June saw an all-time record, and figures in July were only slightly off that pace. French officials estimate that by the end of 2009 France will be about half a million new firms better off. In 2008 just 328,000 small companies were created, and in 2007 the figure was 321,000.

The motor driving all that bustling start-up action is an innovation known as auto-entrepreneur, a government scheme introduced in January to help would-be bosses bypass the formidable process of founding a small business. The scheme cuts through the jungle of administrative red tape usually required to launch a company, and dramatically lightens the heavy taxes and social charges companies pay.

It's not all good news however:

If business starts booming, neophyte owners who take on employees have to register under the normal labor regime, which means assuming the taxes and salary-linked social charges that prove so dissuasive to many would-be entrepreneurs in the first place.

Still, it's a start.