When does self improvement become self help?

Pretty early on, it seems. I'll illustrate how the idea of Inbox Zero is really about self respect. Suppose while working at your desk you immediately read every single email you receive and do your best to respond to each one as quickly as possible. You do this all day, every day. Many in the productivity field would argue that you need to think about how you're managing your inbox. I argue that you need to think about how you're managing your self image. Inbox Zero proponents suggest scheduling times during the day to check email while keeping the email application closed at all other times. Great! You can focus on the work that requires your full attention and you have a plan to respond to the people who depend on you to forward the team's objectives. What you've really done is drawn a line in the sand on two fronts-with yourself and with others. You've said "How I use my time is for me to decide. What I'm doing now deserves my full attention. If someone needs an answer from me, they'll have to wait." Now, that sounds more like something from a post on assertiveness in Psychology Today than one on productivity in Forbes. Maybe this shouldn't be such a surprise, given that our work is such an important part of our identity. If we are going to advise each other on productive matters, we're quickly going to get into the nitty gritty of discipline and self respect, which go much deeper than how you deal with email. Does any of this matter? More to come on this topic as I think about productivity some more. Of course, I might just wait another two years and talk about something entirely different.

Tutoring Econ 101

I have been tutoring my friend who is taking Principles of Micro- and Macroeconomics this summer. His biggest problems with the material are understanding definitions and doing the math. The concepts themselves are usually pretty intuitive, but it’s critical to know the definitions well in order to understand those concepts, and then the math comes in when you have to solve actual problems. I see the most progress with my friend right after it becomes clear that he understands the definitions. Before that, the only way I can know that he needs another explanation of a definition is by asking what it means. This is when I hear an on point response, B.S. or something in between. Whatever it is, I use this as a benchmark for what to explain next. This shows why tutoring can be such a helpful way of learning other than in the classroom. The tutor can figure out where exactly the student needs help through thorough and constant evaluation. Without any help, the student might not even know what he doesn't know. The tutor thus solves an information problem, not by delivering the information the student needs by instruction (which also happens), but by finding out what instruction needs to be given. 

So, teaching this summer has taught me the importance of evaluation. I can’t know what I need to explain to the student unless I know what they already know. Daily pop quizzes for all!

            

Tips in the U.S.A.

My friend just got back from a trip to Rome and Croatia, and told the old story of how people don't tip in european restaurants and the service is bad. On the other hand, the food experiences were the highlight of the trip. This made me wonder, what does economics have to say about tipping? I see two areas where we see what looks like a single good split into two: wages and tabs. The wage is split into a restaurant-paid component and a customer-paid component while the bill is split into a tip component and a tab component. It's important to note that tip percentages have increased over the years.

With wages, we normally expect workers to follow the highest price, but they can't in a tip world where employers generally pay minimum wage. Because tips are a percentage of the tab, servers seek to work at restaurants with the highest menu prices. So we see the best service at the restaurants with the highest prices. Chances are, this is what we would see if servers were paid only with higher wages. The most expensive restaurants have the most expensive labor in the back of house, so they would pay the most for front of house workers if they had to. So far, I would expect more or less the same outcome for wages.

What about customers' paying for service separately from the rest of the meal? If europeans aren't willing to pay higher sticker prices at restaurants with better service, would american restaurants be able to incorporate service charges into their menus? You would think that people would not care if there is a 15 to 25 percent increase in menu prices if they were accompanied by a ban on tipping. If the service at one restaurant isn't up to par, customers go to another one. A few things could be going on here: people like to know that they are paying the server directly and don't think about the tip while ordering food and drinks. From my observations, most people stick to some percentage with only minor adjustments with respect to service. A generous tipper is always a generous tipper. A server who is twice as good as another doesn't get paid twice as much. Also, the social norm of tipping could be an opportunity to impress others. This would explain why tipping outpaces rising menu prices: people seem to derive some pleasure from being a generous tipper, even more so when they compare themselves to others. This brings us back to the tips-as-wages explanation above. As wages outpace inflation, we see more talent in the field since the attractiveness of holding server positions improves. Thus, take-home pay for servers increases faster than they would if managers paid their full wage. This is the explanation I ascribe to the difference between European and American restaurants. I don't really know why, but there is a clear pressure to increase tip percentages compared to others. This puts us in a bidding war for the best service, not the best food.

I'm sure there is a similar showoff effect with the restaurants themselves- people want to impress each other by going to nice restaurants, but that puts pressure on restaurants to improve everything outside of server quality (food quality, decor, etc.), resulting in higher menu prices. Because, again, tips are a percentage of the bill, any rise in menu prices increases the total amount of tips. Since the prevailing tip percentages have increased significantly over the years, we have increased our willingness to pay for good service, relative to the rest of the components of a dining experience. I don't see any reason to think we actually want more attentive service now than we wanted 15 years ago. This increase in price seems to reflect a gradual cultural shift stemming from a desire to one-up others, rather than a shift in preferences. That is to say, we have increased spending at restaurants over the years, but not in ways that we would prefer if we chose which items to pay for. So, in my view, we "buy" more service than we really want.

The Giffen Paradox Explained

This is a fun insight to wrap the mind around. It might not happen very often but it's a nice thought experiment. This is how Giffen goods work: when a good X’s price increases and the only substitute, good Y, is more expensive, people have to purchase more of good X. This should surprise you. Because X’s price is higher, purchases in the same quantity as before the price increase take up a larger share of budgets. Buyers have to purchase more of X and less of Y to round out the total without breaking their budget. Like other price increases, we see a real loss in income. That is, buyers’ budgets are the same as before the price increase but they can buy less satisfaction/utility, so the effect is similar to a decline in income.

Example: Let’s say you are on a tight budget and you can only afford two foods: macaroni and cheese and ramen noodles. You need to buy one or the other every day, and ramen is cheaper than macaroni. You usually eat ramen noodles but you splurge on the more expensive mac and cheese twice per week and this maxes out your food budget. Now say the price of ramen increases, but it is still cheaper than mac and cheese. The law of demand says you will buy less ramen because of this price increase. However, because you are constrained by your budget, you can’t replace ramen with macaroni. The ramen noodle purchases now take up a larger share of your budget than it did before, so you have to buy less macaroni. Since you still need to eat something every day, you have to buy ramen on some or all of the days you previously purchased macaroni. The increased price is what we call a real (inflation-adjusted) decrease in income.