Thursday, June 3, 2010

Effects of coffee on alertness may have been misunderstood.

We have long assumed that we understood the invigorating effect of caffeine. But based on a new study, it looks like habitual drinkers develop tolerance to the stimulating powers of coffee, just like they develop tolerance to dehydrating effects of caffeine. The real reason coffee addicts feel "woken up" by a cup of coffee is because they were feeling withdrawal symptoms (like all other addicts do!). Drinking coffee brings them back to normal, which of course feels like a major improvement from the distressed state they were in before.

So only first-time coffee drinkers get the real cognitive boost, while regular drinkers show improved performance simply by alleviating the addiction withdrawal. Very interesting perspective.

Here is a link to Science Daily article on this: Coffee consumption unrelated to alertness: Stimulating effects may be illusion, study finds.

Tuesday, June 1, 2010

Good union, bad union.

A lot of discussion has been centered around excessive union demands that end up bankrupting various governments. Some have even declared all unions as evil. I think there can be a line drawn; some unions can be a useful tool of social equilibrium, while others may have no economic or social justification at all. I think private unions can be necessary to ensure that the profits are more fairly shared between the owners and the labour, but for this system to work, some conditions have to be met. Below I list those conditions and show how they often do not apply to public unions.

  • Contract negotiation must happen with the employer. This ensures that unions will not be able to extort more than their labour is worth. At some point true business owner would prefer shutting his business down as an alternative to operating at a loss. Public unions, however, negotiate their contracts with other public workers in the government, while the true "business" owner - the taxpayer - is left out of the picture. This often allows public unions to negotiate conditions that could never be sustained in a profitable business.
  • Business interests must be somewhat aligned with labour interests. The alignment does not have to be absolute. But if small private business goes bankrupt, workers normally suffer too. For public unions this is generally not so - public money comes in no matter what.
  • Business must not be a monopoly. This is self-explanatory, I hope. The unwelcome effects of monopolies are well known in the Economic science. Healthy dose of competition ensures that labour  stays aware of its true market price. Public unions are often operated within a monopoly service, such as school system, and the costs are frequently hidden from both the taxpayers and the users of these services. The results, again, are a distortion of the market and salaries that would never be obtained in a competitive business.
 These three points are my case against many public unions, but not necessarily against private ones.

Bad outcome does not mean a bad decision has been made.

Bad outcome does not mean a bad decision has been made.
I saw this quote in an accounting textbook. Of all places. But I think it sums up pretty nicely what it means to live in a world that is ruled by probabilities. Too often I see people analyze various failed ventures trying to identify the mistakes. It's quite possible that no mistakes were made; maybe everything has already been done to maximize the chances of success but sometimes the odds just line up against you.