Santa “Too Big to Fail”

December 13, 2008

From the Wall Street Journal:  “With the government on the brink of rescuing the U.S. auto industry, we have learned that the Treasury Department is drawing up plans to bail out Christmas. “We have reason to believe,” said a person close to the matter, “that without an immediate capital injection, Santa Claus will fail before December 24.” Mr. Claus could not be reached for comment.  Government officials are said to be concerned at the risk that the collapse of Santa Claus could pose to the nation’s intricately related system of holiday happiness. Though a failure by Santa Claus poses the largest systemic risk, the government is also prepared to step in to bail out Christmas trees, caroling parties and mistletoe producers.”  Read more and happy holidays!

The New York times tells me that the financial crisis is having new effects: on nannies and housekeepers (chimney-sweeps included).  Amongst New York professionals who are facing job losses and economic uncertainy, there is increasing pressure to cut back on domestic help.  Thus the crisis seems to have spread quickly from the financial economy to the real economy and then down to the blackmarket economy, where most nannies, housekeepers and other domestic help is hired and paid.

I’ve written elsewhere on the political economy of nannies in London, before I had one myself.   The wages of London nannies were reported (at that time) to be on average £33,000 a year, though having now entered the market, I can see that that average was massively thrown off by the full-time, live-in nannies of the uber-rich.  I imagine that nannies working in those type of positions, who are primarily employed for people working in the finance industry, might be at risk of cut-backs or job loss.  But amongst those of us that compromise the “normal nanny demand pool” the crisis has no effect on our provision of childcare.  Childcare has an inelastic demand curve as there are no suitable alternative replacements and our demand doesn’t weeken even if our economic future becomes more uncertain, unless of course we cease to have a demand because we lose our jobs and have to stay at home.

If anything, the financial crisis has increased my demand for childcare, not decreased it.  I find myself busier than ever, but maybe that’s because we work in a counter-cyclical industry, where student numbers and demand for consultancy tend to go up when crises hit.   Fortunately, that means that I don’t have to face the kind of hard choices the people in the New York Times article are facing, and neither does our (absolutely fantastic) nanny.

Horreur!  The French are starting to make clones of the precious black Périgord truffle!  The Financial Times reported that with the annual harvest of these very pricey fungi down to 40-50 tonnes a year (from 1,000 tons one hundred years ago), the industry is inventing around the problem to try and produce test tube truffles.

With a price tag of up to €1,000 per kilo, it’s strange that the market has not responded sooner with greater provision.   The “truffle king” quoted in the FT article says that young people are not interested in the trade, but if the market works, its hard to believe that something which fetches such exceptional returns does not pull people into the trade.  Especially as the costs of entry are relatively low: if you want to get into this very profitable business all you need is a short introduction to truffles, some woods, and a four-legged friend.  Here you have two options.  As truffles emit a scent similar to that of the hormones of a male pig, you can get yourself a nice (but undoubtedly frustrated) sow to hunt out truffles for you.  Or, if you would prefer to minimise the chances that your helper accidentally eats the truffles, or if you lack suitable pig transport and storage, you can train a dog to do the pig’s work.

The article more generally attributes the lagging production to a decline in French agriculture (no one tell the agricultural lobbyists), and to less suitable growing conditions.  A decline in growth of truffles due to climate change or habitat encroachment seems to me to be a more sensible explination of why the supply is declining than lack of interest, given my faith in economic principles such as competition.  Producing truffles in test tubes might be the only way around this problem.

Of course, you wouldn’t want the test tube truffles to be too successful, otherwise prices will drop dramatically.   Though I suspect that the French, who are experts at applying EU laws enabling geographic indicators of origin (think for example of champagne which by law can only come from Champagne) will find a marketing technique to make sure that the  truffle-sniffing snouts of all connoisseurs are turned up at TTTs (test tube truffles) and favour only organic, wild, and swine-sourced truffles.

Obama hearts LSE

December 3, 2008

According to the Financial Times, Obama’s incoming team has more graduates from the London School of Economics than any other university.  Three out of 15 incoming cabinet members and senior White House staff earned degrees here at the LSE.  A pretty good ratio, and more than Harvard, Yale, Princeton or MIT.  Seems that Old England is beating New England in representation of academic training.

Also notable of course that the switch across the Atlantic favours LSE, not Oxford or Cambridge.  With just 15 days to go until the UK’s Research Assessment Exercise, which ranks UK universities based on their research output, is published, this piece of news will surely excite those that care about the LSE’s capacity to influence policy as well as the ivory tower.  I’m just happy to see that this is just another way that Obama makes the dream of Jed Bartlet‘s West Wing come true.  The fictional ex-president Barlet of course received his PhD from the LSE.