Latest Publications

Learn all the things!

Today, I decided to delve into the world of MOOCs (Not to be confused with MOOP.) Massive Open Online Courses are part of a large-scale learning platform where classes are offered freely to anyone via the internet. Many major colleges are offering classes in a variety of subjects, some offering certification in the subject upon completion.

I became aware of MOOCs a few years ago, when I was a full-time student with an already-full schedule. Now, as a recent graduate with some more free time on my hands, this is a wonderful opportunity of which I can finally take advantage. I’m currently considering an Asset Pricing class offered by The University of Chicago, but it’s so difficult to decide what to enroll in first! I’ve found interesting class subjects ranging from classical song composition to computer programming.

It just amazes me how much knowledge is available right at my fingertips. Seems pretty economical to me to learn all the things!

Rent-to-Own Tires: Do your research

This article from the LA Times was sent in by a reader (thanks!) and I found it pretty interesting, not only as an economist, but as a new car owner who recently had to have my tires replaced.

The article discusses how some motorists are deciding to rent-to-own tires for their vehicle because of high costs. However, the costs ends up being much more than had the tires been bought outright. In one example from the article, one customer ended up paying $2,953 ($164 for 18 months) for tires that would otherwise have cost her $1,340. This works out to over 120% annual interest which is quadruple some of the highest credit card rates.

But the main point the article mentions over and over again is that these consumers didn’t realize until it was too late how terrible this “good deal” really was. I realize some people are in difficult financial situations and may be trying to save money however possible, but that’s no reason to jump blindly into a large decision involving money. It took me less than a minute to search for a time value of money calculator and plug in the numbers to see that perhaps an alternative deal should be looked for.

What I’d really like to get across to anyone out there reading this is to ALWAYS do your research. That’s part of what being a Rational Reactor is. :)

Do bike helmet laws work?

An interesting paper was recently published by the National Bureau of Economic Research on the effects of bicycle helmet laws on children’s injuries. The results found that while “helmet laws are associated with reductions in bicycle-related head injuries among children, […] the observed reduction in bicycle-related head injuries may be due to reductions in bicycle riding induced by the laws.” In fact, there was an observed increase in head injuries from other wheeled sports; perhaps children found different activities to take part in where they wouldn’t need to wear a helmet.

This isn’t the first time we’ve discussed unintended consequences here at Rational Reactor. Many policies that are intended to keep people safe often end up with secondary consequences that are difficult to predict. BikeSafe has an interesting website that touches on this. Not only do they discuss different unintended consequences from past helmet laws, but they are dedicated to getting the public to focus more on overall biking safety, rather than just helmets.

Another interesting thought: What would happen if there were no laws? We can take a look at Germany where there are no laws mandating helmet use for bicyclists of any age. They cite an overall greater benefit to the population’s health because more people are able to bike without having to worry about laws.

Perhaps instead of focusing solely on making bicycle riders wear helmets, we should take BikeSafe’s lead, and focus more on overall bike safety.

How economists say “I love you”


Liz Fosslien has thirteen more up on her blog, just in time for Valentine’s Day!

Interactive Big Mac Index

Over at the Economist website, they have a very interesting interactive tool for the Big Mac Index.

The Big Mac index was invented by The Economist in 1986 as a lighthearted guide to whether currencies are at their “correct” level. It is based on the theory of purchasing-power parity (PPP), the notion that in the long run exchange rates should move towards the rate that would equalise the prices of an identical basket of goods and services (in this case, a burger) in any two countries. For example, the average price of a Big Mac in America at the start of 2013 was $4.37; in China it was only $2.57 at market exchange rates. So the “raw” Big Mac index says that the yuan was undervalued by 41% at that time.

Go check it out!