who captures values in the making of iPod?

Here is Hal Varian's take on this.

Who makes the Apple iPod? ... It is not Apple. The company outsources the entire manufacture of the device to a number of Asian enterprises, among them Asustek, Inventec Appliances and Foxconn..... They only do final assembly.
Three researchers....— Greg Linden, Kenneth L. Kraemer and Jason Dedrick — applied some investigative cost accounting to this question...
To answer this question, let us look at the production process as a sequence of steps... At each step, inputs like computer chips and a bare circuit board are converted into outputs like an assembled circuit board. The difference between the cost of the inputs and the value of the outputs is the “value added” at that step, which can then be attributed to the country where that value was added.
The profit margin on generic parts like nuts and bolts is very low, since these items are produced in intensely competitive industries and can be manufactured anywhere. Hence, they add little to the final value of the iPod. More specialized parts, like the hard drives and controller chips, have much higher value added.
..authors’ estimates, the $73 Toshiba hard drive in the iPod contains about $54 in parts and labor. So the value that Toshiba added to the hard drive was $19 plus its own direct labor costs. This $19 is attributed to Japan since Toshiba is a Japanese company.
Continuing in this way, the researchers ... tried to calculate the value added at different stages of the production process and then assigned that value added to the country where the value was created. This isn’t ... easy ..., but ... it is quite clear that the largest share ... goes to ... the United States, particularly for units sold here.
...researchers estimated that $163 of the iPod’s $299 retail value ... was captured by American companies and workers, breaking it down to $75 for distribution and retail costs, $80 to Apple, and $8 to various domestic component makers. Japan contributed about $26 to the value added (mostly via the Toshiba disk drive), while Korea contributed less than $1.
The unaccounted-for parts and labor costs involved in making the iPod came to about $110. The authors hope to assign those labor costs to the appropriate countries, but ... that’s not so easy to do.
This ... illustrates the futility of summarizing such a complex manufacturing process by using conventional trade statistics. Even though Chinese workers contribute only about 1 percent of the value of the iPod, the export of a finished iPod to the United States directly contributes about $150 to our bilateral trade deficit with the Chinese.
Ultimately, there is no simple answer to who makes the iPod or where it is made. ... The real value of the iPod doesn’t lie in its parts or even in putting those parts together. The bulk of the iPod’s value is in the conception and design of the iPod. That is why Apple gets $80 for each of these video iPods it sells, which is by far the largest piece of value added in the entire supply chain.
Those clever folks at Apple figured out how to combine 451 mostly generic parts into a valuable product. They may not make the iPod, but they created it. In the end, that’s what really matters.

3 famous psychology studies that would have been illegal today:

Here is the link

1. Stanley Milgram's Obedience Studies
2. Stanford Prison Experiments
3. Little Albert Experiments

history map of europe: circa 1000 AD

Here is the link.

gender wage differential: politically (in)correct paper

In a recent paper, M Daniele Paserman citing the evidence from the professional tennis, concludes that female tennis players play more conservatively and commit more unforced errors when playing critical points. Does this explain the upper-echelons wage gap?

...have seen a dramatic increase in female labour force participation rates, and a considerable narrowing of the gender gap in wages....the gender gap persists – much of it due to gender disparities at the very high end of the wage distribution where women have made only limited inroads – the famous ‘glass ceiling’ of the upper echelons of academia, management, and prestigious professions.
...under-representation is not easily explained....hypotheses, ranging from discrimination to differences in preferences, have been offered. One particularly intriguing hypothesis ...women may be less effective than men in highly competitive environments – even if they are able to perform similarly in non-competitive environments. ...study the role of gender in responses to competitive pressure, using data from the world’s most prestigious tennis tournaments. This column discusses the results and suggests some implications for future research.
Why tennis?

....well-suited for statistical analysis. The outcomes are well-defined - the last shot of a point can only be one of three things: a winner, a forced error, or an unforced error. The competitive environment is also relatively easy to judge objectively – using things such as the tournament round, the two players’ rankings, and the number of points played. Moreover, the sport’s non-linear scoring structure introduces significant variation in the importance of individual points. It is often a small number of individual points at critical junctures that determine a match’s result. A break point in the latter stages of an evenly fought early set can be more decisive than a point in the early stages of the final set. It is exactly this substantial variation in the importance of points across and within matches that allows identification of a link between performance and the degree of competitive pressure.
...Technically, it is the probability that the player wins the match conditional on him or her winning the current point minus the probability that he or she wins the match conditional on him or her losing the current point. For example, consider the 2006 Wimbledon men’s final, Federer versus Nadal. At the outset of the match, the estimated probability of Federer winning the match was about 65.1%. Winning the first point (on Federer’s serve) would have raised his probability of winning the match to 65.7%; losing the point would have lowered his probability of winning the match to 63.6%. In my measure, the importance of that first point was 2.1%. For the sixth point of the second game where Nadal (serving) faced break-point at 30-40, winning the point would have raised Federer’s probability of winning to 75.8%, losing it would have lowered the probability to 67.1%. Hence, the importance was 8.8%. ..this was the ninth most important point of the entire 2006 Wimbledon final, despite coming so early in the match.
With this measure in hand,...the influence of a point’s importance on the frequency with which players commit unforced errors and on their style of play. Using data for nearly 42,000 points in 238 matches played in four recent Grand Slam tournaments,...find important gender difference. While men’s performance does not vary much depending on the importance of the point, women’s performance deteriorates significantly as points become more important.
Multinomial logit regressions that control for the abilities of each player, the round of the tournament, the duration of the match prior to playing the point, the tournament location, and whether the match was played on the tournament’s main court show that gender matters in players’ response to competitive pressure. Women are significantly more likely to hit unforced errors at the most crucial stages of the match, while men exhibit no significant variation in performance. Specifically, about 30% of men’s points end in unforced errors, regardless of their placement in the distribution of the importance variable. For women, about 36% of points in the bottom quartile of the importance distribution end in unforced errors, but unforced errors rise to nearly 40% for points in the top quartile of the importance distribution. What is remarkable is not the difference in the levels (men are more powerful and therefore more likely to hit winners at any stage). The interest lies in the differences in the way men and women respond to increases in competitive pressure.
....contextualise the difference in the probability of making an unforced error due to greater pressure, the magnitude of the multinomial regression result is around one-fourth of the impact of changing from the fast grass courts of Wimbledon to the slow clay courts of the French Open. Given the importance that playing surface has in determining tennis outcomes, this is a fairly large effect. It is also robust to alternative measures of importance.
Is it physical?One potential explanation for the gender gap in propensity to err during crucial points is that men and women adopt different levels of aggressiveness as points become more important. For example, if players adopt a conservative playing strategy and just lob the ball from one side to the other without ever trying to hit a winner, the point will inevitably end with an unforced error. Indeed, there are substantial gender differences in the style of play as the stakes become higher.
Men hit faster first serves as importance of the point rises, while women hit significantly slower first and second serves as the stakes mount. Amongst females, serves for points in the top importance quartile are nearly three and a half miles per hour slower on average than serves in the lowest importance quartile. Adopting this less aggressive strategy increases the likelihood that the first serve will be in play, but it does not significantly improve the server’s chances of winning the point (in fact, it slightly lowers it). Moreover, women’s first serves in the fourth quartile of the importance distribution are both less powerful and less accurate than their first serves in the third quartile of importance. This result echoes previous work finding that performance anxiety elicits cautious, protective strategies that are associated with poor performance, i.e., decreases in speed without an associated improvement in accuracy.1

...the possibility that these asymmetric responses to high stakes might be due to differences in style of play resulting from physical differences between males and females, ...Though some of the results indicate that low-power players are less aggressive and make more unforced errors on important points irrespective of gender, the evidence does not contradict the basic finding that there are substantial differences in the way men and women approach important points in the match.This finding complements existing literature on performance under pressure by examining an atypical sample – extremely competitive athletes who are amongst the very best in the world in their profession. Perhaps surprisingly, even these highly competitive women exhibit a decline in performance in high-pressure situations. Moreover, this effect is present in women-only competitions, contradicting the narrower hypothesis that females perform worse under pressure only when facing male opponents.
Tennis to the labour market

Of course, it would be inappropriate to extrapolate from a single study of a very select group of individuals to the broader labour market. Professional tennis and its competitive pressures are substantially different from the activities and stresses in business and academia. First, different selection patterns may be operating between elite male and female professional tennis players. It may be that this selection pattern, rather than gender differences, accounts for my finding that top male players are better able to cope with high-pressure situations. Tennis may also involve motor skills – as opposed to cognitive skills – that may generate different responses to increases in competitive pressure. Finally, the nature of high-pressure situations in tennis – which necessitate accurate decision-making and execution in a matter of split seconds – are probably shared in only a limited number of professions.
Nevertheless, the finding of such a robust gender difference in performance under pressure, even in the extreme right tail of the talent distribution, is sufficiently interesting that it should stimulate further research into this possible explanation for the persistence of the gender gap.--------------------------------------------------------------------------------

Footnote1

Jennifer Butler, and Roy Baumeister. “The Trouble with Friendly Faces: Skilled Performance with a Supportive Audience.” Journal of Personality and Social Psychology, 1998.

I think the wage is more or less equal to the marginal revenue product, the basic microeconomic theory. In the past, fewer viewers watched womens' tennis, thus they got paid less. This is not true now, and the wage gap is shrinking or disappearing.
Also at the Grand Slam level, men get paid more because they work more (5 sets versus 3). So, in accordance with the paper in question, men provide both a better quality and larger quantity of tennis to the viewer.

the time-line of the "End of the World"

india rising

If the Indian economy has been growing at such a robust pace, why has government debt risen so much? World Bank economists Marina Wes, Brian Pinto and Gaobo Pang answer the question in latest World Bank Policy Research Paper 4241. Here is the astract of the paper:

Over the past 25 years, India's economy grew at an average real rate of close to 6 percent, withgrowth rates in recent years accelerating to 9 percent. Yet, by 2005/06, the general governmentdebt-to-GDP ratio was 34 percentage points higher than in the 1980s. We examine the linksbetween the public finances and growth in the post-1991 period. We argue that the main factor inthe deterioration of government debt dynamics after the mid-1990s was a reform-induced loss intrade, customs and financial repression taxes; over time, these very factors plus lower entrybarriers have contributed to stronger microfoundations for growth by increasing competition andhardening budget constraints for firms and financial sector institutions. We suggest that theimpressive growth acceleration of the past few years, which is now lowering governmentindebtedness, can be attributed to the lagged effects of these factors, which have taken time toattain a critical mass in view of India's gradual reforms. Similarly, the worsening of the publicfinances during the late 1990s can be attributed to the cumulative effects of the tax losses, thenegative growth effects of cuts in capital expenditure that were made to offset the tax losses and apullback in private investment (hence growth and taxes), a situation which is now turning around.Insufficient capital expenditures have contributed to the infrastructure gap, which is seen as aconstraint, especially for rapid growth in manufacturing. We discuss the ongoing reforms inrevenue mobilization and fiscal adjustment at the state level, which if successfully implemented,will result in a better alignment of public finances with growth by generating further fiscal spacefor infrastructure and other development spending.

YouNotSneaky: Commandments of (Political) Economics

YouNotSneaky! suggests a 12 principles (some counting problem, I guess!!):

1. The answer to most questions in economics is usually “It depends”.
2. People respond to incentives, but incentives are determined in their own head and who knows what goes on in there.
3. But on average, masses of people respond in fairly predictable ways and these predictable ways, embodied in the so-called “Econ 101” thinking, are pretty useful guides. They are not absolutes however.
4. “On one hand … on the other hand” is about as good as you can do in a complicated world.
5. All economic models boil down to two (occasionally three) curves on a blackboard that cross. If it’s more than that or if you can't draw it that way, then your model stinks.
6. First Fundamental Theorem of Economics: Where the two curves cross, it’s important.
7. Game theory accidentally teaches us that outcomes are very sensitive to the structure of interaction. Small changes in the rules of the game can produce vastly different outcomes.
8. A logical, aesthetically compelling, story is important, even if the assumptions are crazy. Check it with math.
9. Anyone who makes exaggerated claims about their pet theories, ideas, or solutions, be they mainstream or heterodox, either doesn’t know what they’re talking about, hasn’t done their homework or is trying to sell you something. “Our results SUGGEST…” is a good indicator that a person has thought hard about their subject. At least as far as these things go. A thorough method combined with some humility should invite more attention than extraordinary claims of genius. Scientific progress takes place at the margin.
10. When an economic idea about how things work pops into your head, your very next question should be “why is that wrong?”. It’s useful to simulate competition among ideas in your brains so that only the truly good ones survive. Success, however, is not guaranteed.
13. “I don’t know” is often the best answer that can be given.

Doni Rodrik added few to have better count:

12. People everywhere are pretty much the same. It is the incentives and constraints they face that differ.
13. Everything that an economist says today has been said before, typically in more elegant fashion, by an economist of an older generation. That makes them neither true nor false. It just suggests that what is new in our profession is the technique, not the insight.
14. Beware when economists start to talk using metaphors ("shock therapy," "diagnostics," "big push" to use some recent ones from this blog). It is a good sign that they do not quite know what they are talking about.
15. When economists disagree about policy, it is most often because of implicit moral and political judgments, rather than economics per se.

random packing

In a new research published in the PRL (subscription required), computer simulations reveal an underlying structure for the disordered state of a large number of spheres dumped into a box. Thanks to Don Monroe for the pointer.

lakes and islands and combinations thereof: interesting facts

"Largest island"
"Largest lake"
"Largest lake on an island"
"Largest island in a lake"
"Largest island in a lake on an island"
"Largest lake on an island in a lake"
"Largest lake on an island in a lake on an island"
"Largest island in a lake on an island in a lake"
"Largest island in a lake on an island in a lake on an island"

Largest Island
Greenland (DEN)

(map source: www.expediamaps.com)

Largest lake
Caspian Sea (RUS/KAZ/AZE/TKM/IRN)

(map source: www.expediamaps.com)

Largest lake on an island

Nettilling Lake on Baffin Island (CAN)
(map source: www.expediamaps.com)

Largest island in a lake
Manitoulin Island in Lake Huron (CAN)
(map source: www.expediamaps.com)

Largest island in a lake on an island
Pulau Samosir in Danau Toba on Sumatera (INA)

(map source: www.expediamaps.com)

Largest lake on an island in a lake
Lake Manitou on Manitoulin Island in Lake Huron (CAN)

(map source: www.cycnorth.com)

Largest lake on an island in a lake on an island
Crater Lake on Vulcano Island in Lake Taal on Luzon (PHI)

(photo source: www.jpl.nasa)

Largest island in a lake on an island in a lake
Island in Mindemoya Lake on Manitoulin Island in Lake Huron (CAN)
(see map above)
Largest island in a lake on an island in a lake on an island
Vulcan point in Crater Lake on Vulcano Island in Lake Taal on Luzon (PHI)

(photo source: www.adventure.simplenet.com)

US States Renamed For Countries With Similar GDPs

Thanks to Carl for the pointer. More link here. The notable absence is India,