Wednesday, September 26, 2007

Lee Bollinger's Unfortunate Remarks: Ahmadinejad at Columbia

There is a speech I would not have looked forward to giving -- "welcoming" President Mahmoud Ahmadinejad to the Columbia campus. Luckily it fell to President Lee Bollinger and not to me. Talk about a no-win situation.

President Bollinger, who was Provost at Dartmouth for a few years, scored about 80% on my grading scale. Unfortunately, the areas where he slipped up were rather serious.

So much of his speech is right on the point. Put most simply, we do need to hear what our adversaries have to say. For all the critics of the Iraq war, one would think that there would be overwhelming support for getting the best information possible on Iran before that comes to war as well. And the US can and will take the high road: let our citizens hear Ahmadinejad out, and let them make political decisions. We have elections coming up (lots of evidence of that in Hanover tonight, with all the Democrats in town) and voters should be seriously considering who will best handle the Iranian situation.

But...why then engage in some pretty nasty name-calling? Why call the President of Iran a "petty and cruel dictator?" Why say "I doubt that you will have the intellectual courage to answer these questions?" Why the scornful "You are either brazenly provocative or astonishingly uneducated?" These are soundbites unbecoming of the President (or even a professor) of one of the world's leading liberal arts universities.

While many seemed to enjoy the sight of Ahmadinejad having to listen to Bollinger's insults, I actually have to hand it to the President of Iran for his response: "In Iran tradition requires that when we in a person to invite to be a speaker we actually respect our students and the professors by allowing them to make their own judgment and we don't think it's necessary before this speech is even given to come in with a series of claims and to attempt in a so-called manner to provide vaccination of some sort to our students and our faculty." (Quoted from the Washington Post transcript, with some obvious grammatical problems.) No doubt, Ahmadinejad is no intellectual light weight. Sparring with him would be a good fight.

I also think that Bollinger should have held back on the long list of complaints against Iran. Get up, say why Columbia is having him speak and why people should at least accept that if not be proud of it, and then give him the podium. Save time for questions -- the real learning was in President Ahmadinejad's responses to questions, not in President Bollinger's prepared remarks.

It was a tough situation to be in, with half of the listeners sure to be ticked off no matter what you did. The job of University President is not an easy one.

Monday, September 17, 2007

France Steps Up to the Plate!

What a difference an election makes. On Sunday, French Foreign Minister Bernard Koucher said that "the world must prepare for the worst" in regard to Iran and, when pressed, said that the worst was "war." See the Deutsche Welle's story. (Ah, the Deutsche Welle, that reminds me of when I used to listen to DW on a shortwave radio -- and the BBC, before I lost my trust in that service.)

While backing down a bit on Monday, France stuck to its guns pretty well, saying that since UN sanctions will never happen, a set of EU sanctions similar to those of the US are possible: see the International Herald Tribune.

Le petit Nicolas, as one of my French friends refers to the French President, is making quite a stir on the international scene. What a shame he wasn't around when the US had to serve the world and take out Saddam Hussein.

Sunday, September 16, 2007

An Experiment in Adverse Selection

An article in Friday's Wall Street Journal, written by Chad Terhune, describes new health insurance policies being offered by some insurance companies. I can't give a reference to the WSJ piece, but another paper reports on it here. The ones offered by American Community Mutual Insurance are particularly interesting. They are targeted at the "healthy young" and offer low annual premiums, around $1000 per year. That doesn't get you much, however, as there is a rather small maximum benefit and a large deductible. What it does get you is the option to buy a much larger benefits cap -- up to $5 million -- if you do get sick and want to initiate the higher coverage. "Coverage on Demand," the company says. Of course, that additional coverage is expensive. It HAS to be, because only the ones who buy it will need it! So given the adverse selection that has to happen, is there a price that will allow the company to break even at least, and that will attract some customers into the program? Or at any price, will the only customers who sign up be so costly that the company will have to lose money? The higher the price of the "coverage on demand," the sicker and more costly will be the individuals who sign on. Or, maybe, the individuals who get sick will have enough uncertainty and be so risk-averse that they will buy expensive coverage even when their medical bills will not be all that large.

There is a large market of rational individuals who find medical insurance too expensive and therefore go uncovered, so I can understand the experiments at attracting them. And there are a lot of new plans coming out, especially as some states like Massachusetts require insurance. The fine print is going to lead to a lot of litigation, I predict: what maximum benefits really are, whether they were disclosed, non- covered conditions, etc.

Great case to cover in a class on the classic information economics problems of adverse selection and moral hazard.

Monday, September 10, 2007

General Petraeus and Ambassador Crocker

A few observations on the testimony today of General Petraeus and Ambassador Crocker. I listened to some, watched a bit on TV, and based on what I saw:

1. If the White House communicated as well as these two fellows (heck, half as well), these hearings would not be happening – because the Democrats would not be in charge of Congress.

2. The ad in the NYT brings rational discussion to a new low. To refer to General Petraeus as General Betray Us not only gratuitously insults someone who appears to really care for our country, and obviously works hard at his job, but it demeans the debate over the war. Shame on them.

3. The Democrats are really scared, because they see that if they do indeed win the White House next election and keep control of Congress, any pullout from Iraq will be their decision – and they could well be in a position of explaining to their supporters why we have to stay in even longer. Political posturing is cheap for them now, but they realize that if they were actually in control, they would be making the same decisions.

4. I never understood why “exit” is valued so highly, even if we succeed in stabilizing the situation. I see tremendous value in having, say, a US military base on the Iran/Iraq border – something widely reported today. What, strategically, is bad about having 100,000 well-trained and well-equipped troops on the borders of Iran, Syria, Kuwait, and Saudi Arabia?

Apple’s iPhone Price Cut

So no sooner did I write my post below about how Apple rarely has sales, and they promptly cut the price of the iPhone by $200. I did not mean by “sales” the (anticipated) cutting of price after an initial product launch, but instead the kind of sales like “back to school” or “holiday” or “Labor Day.” Cutting of price after an initial launch can often be wise, and I like to refer to it as “temporal versioning.”

Versioning is generally the idea of offering different versions of the same basic product at different prices. If you offer a deluxe version at a high price and a basic version at a lower price, you can effectively price discriminate, with some folks buying the high-priced version and the more price-sensitive folks going for the cheap version.

Critical to this strategy is separation: the two versions have to be kept distinct enough so that the folks who like the deluxe version won’t see the cheap version as almost as good, and at the lower price, a better deal overall.

With temporal versioning, separation is also temporal -- the time between the high price period and the low price period has to be long enough to keep everyone from seeing the sense in waiting for prices to fall.

Apple seems to have not temporally separated its versions well enough. Nice strategy, but off a bit on the implementation. The consumer outcry is pretty good evidence of the error. Interesting, often when discussing price discrimination students will mention the anger when some consumers discover that others are paying a lower price (economists like to walk down an airplane’s aisle asking people what they paid for their seat). My response to this is often: who cares if the consumers are mad? With Apple, and the importance of repeat purchases, consumer anger could translate quite powerfully into lower sales.

Saturday, September 01, 2007

The Irrational Allure of Liberal Songwriter/Singers

So Pete Seeger has written a new song, "Big Joe Blues" that recognizes Seeger's earlier errors in overlooking the evil of the Stalin/Soviet empire:

He ruled with an iron hand
He put an end to the dreams
Of so many in every land
He had a chance to make
A brand new start for the human race
Instead he set it back
Right in the same nasty place

I admit to a certain attraction to songwriter/singers like Seeger, Lennon and Dylan. I think it is the pureness of their idealism, no matter how wrongheaded it might be, I just have to admire it. "Imagine there no possessions." Well, I can imagine that, and it is not pretty, but I can understand what Lennon was trying to accomplish.

Steinbeck' stories are similar. A very socialistic message, but one that hits you very hard and that cannot be ignored.

Apple and NBC Disagree on Pricing

The New York Times reports that Apple and NBC disagree over pricing of NBC’s video content on the iTunes site. Apple prices all TV shows at the flat rate of $1.99; NBC wants more popular shows to sell for more and to be able to offer promotional prices.

Such disagreements are not surprising. Both firms have monopoly power, so both want to make a monopoly profit. Of course, from one firm’s perspective, a monopoly profit by the other firm is equivalent to a tax that reduces sales and revenues.

Right now, there is a standoff, with Apple not offering any new shows from NBC. Negotiations are supposedly continuing. Who wins will suggest to me just how important the iTunes site is to the content providers.

The other interesting observation is how little Apple uses promotional pricing. I am thinking of buying a new Mac, and there is really little reason to hope for a “back to school” sale – well, I guess they offered an iPod to college kids this year, but generally you might as well not look forward to any big sales by Apple. Interesting pricing strategy -- and of course there is also the uniform 99 cent per-song price that has also been criticized by some copyright owners. Why not adjust price on the basis of demand for a song? Thoughts, anyone?