There’s a cartel between German car makers – and it’s pretty bad

The Spiegel, in English (link at the end of the post, via Guillaume de Calignon):

Daimler, BMW, Audi, Porsche and Volkswagen often no longer compete with one another. Instead, they secretly cooperate, very closely, in fact, in the same way one would normally expect of the subsidiaries of a single company to work together, as something like a “German Cars Inc.” — or a cartel. […]

The agreements among the German automakers likely constitute one of the biggest cartel cases in German industrial history.

And this cartel isn’t something new:

Daimler, BMW, Volkswagen, Audi and Porsche have coordinated matters relating to the development of their vehicles, costs, suppliers and markets “for many years — at least since the 1990s and to this day.”

As usual with a cartel, there’s a long list of losers:

The secret agreements are also detrimental to customers, who buy German vehicles because, among other things, they expect to be getting the best possible products from a technical standpoint. But how can a company produce the best if competition is curbed, and if the engineers stop doing their utmost to outdo the engineers working for other brands?

And then there are the millions of owners of diesel cars. In an almost bizarre way, they too are victims of the German auto cartel. For the first time, there is proof that it was agreements among these five automakers that ultimately ensured that emissions from diesel vehicles were not cleaned as effectively as would have been technically possible. This all began with the cartel of the five automakers.

Diesel buyers are now left with the damage. They face the prospect of no longer being allowed to drive their cars in cities, and of suffering significant losses when selling the vehicles. Shareholders are also among the victims. Penalties for cartel violations weaken the companies in which they hold shares and can lead to declining share prices. Suppliers are also adversely affected, as is almost always the case with cartel agreements. If the five German automakers agree to buy from only one company, others stand no chance of securing orders.

The cost of this cartel, considering how long it existed and the number of companies involved (basically, all of them), is probably extremely high. And it’ll rise even further with the fines and the damages it’ll create to the industry’s image:

The cartel of German automakers could […] face fines in the billions. And the industry’s image, which has already suffered considerably from the diesel scandal, will be damaged even further.

Now this cartel is exposed, I wonder why it have survived for such a long period. Who knew? Were some people in the government aware that things were over the legal edge with cars manufacturers? It raises real questions, and I wouldn’t be surprised to discover that the story of this cartel isn’t over…

The Cartel: Collusion Between Germany’s Biggest Carmakers – SPIEGEL ONLINE – International

The diesel scandal is not a failure on the part of individual companies, but rather the result of collusion among German automakers that lasted for years. Audi, BMW, Daimler, Volkswagen and Porsche coordinated their activities in more than a thousand meetings. The exposure of a cartel.

Source: www.spiegel.de/international/germany/the-cartel-collusion-between-germany-s-biggest-carmakers-a-1159471.html

Improving Economics Academic Journals by Publishing Negative Results

Very interesting piece by Douglas L. Campbell on his blog about fixing academic journals. But I think there’s also another problem: negative results have a very low probability to be published.

I know this specific issue is not related to academic journals per see, as it depends more on the way researchers perceive what’s scientifically valuable in their field. But negative results should not be forgotten in the race of publishing, because a good experimental protocol or a good econometric setting that leads to a “I didn’t find what I was looking for” conclusion is a form of knowledge.

A journal of negative results has been launched in medicine. What about (and when) something similar in economics? It could help to make economics an even stronger science.

How to Cure a Cancer: Thoughts on Improving Academic Journals

So, I currently have a paper that has been under review since last December, coming up on 7 months. A friend of mine recently waited somethi…

Source: douglaslcampbell.blogspot.fr/2017/06/how-to-cure-cancer-thoughts-on.html

Efficient information processing can be easier than what economists usually think

Austin Frakt for The Upshot (my own highlights):

A great deal of the decrease in deaths from heart attacks over the past two decades can be attributed to specific medical technologies like stents and drugs that break open arterial blood clots. But a study by health economists at Harvard, M.I.T., Columbia and the University of Chicago showed that heart attack survival gains from patients selecting better hospitals were significant, about half as large as those from breakthrough technologies. […]

Rather than clinical quality, which is hard to perceive, patients may be more directly attuned to how satisfied they, or their friends and family, are with care. That’s something they can more immediately experience and is more readily shared.

Fortunately, most studies show that patient satisfaction and clinical measures of quality are aligned. For example, patient satisfaction is associated with lower rates of hospital readmissions, heart attack mortality and other heart attack outcomes, as well as better surgical quality.

This story is a striking illustration that simple heuristics as “following the satisfaction of other people” can be surprisingly good (and cheap) at processing information. In other words, relevantly processing information does not necessarily require sophisticated individuals with alleged high cognitive skills – like homo economicus.

It’s also (and to me, very) important to note that these heuristics are collective heuristics: it’s not a single individual who processes information for the whole group. Rather, it’s virtually all the members of the group who do a little bit of information processing, and what’s actually relevant is the aggregated result. A patient with a bad experience in a given hospital is statistical noise: mistakes can happen ; a lot of patients telling bad things about a given hospital probably means that this hospital is actually not that good: a lot of mistakes means something’s not going well.

Source: The Life-Changing Magic of Choosing the Right Hospital – The New York Times

Are economists actually “boring”?

Saw this on Twitter today:

Before retweeting it, I decided to check the source. Mainly to be sure it isn’t an hoax. Well, it is not an hoax but the author himself wrote “This no peer review, and I wouldn’t describe this as a “study” in anything other than the most colloquial sense of the word“.

On the source website, the RateMyProfessor.com reviews can be sorted by positive and negative ones. It made me wondered about the context in which the word has been written: “boring” in “this class was boring” doesn’t mean the same thing than “boring” in “this class was everything but boring” or “I expected a boring class but it was finally not“. Can we control for that? Short answer: we can’t. At least, not easily in this graph. Again, author’s words.

Reasonably, what this graph shows is that students use “boring” more when they wrote reviews of economic classes in RateMyProfessor.com. To say what? Hard to tell. And is RateMyProfessor.com data generalisable? Naturally, I wouldn’t trust this kind of website – where control is very limited, leading to very noisy data. For instance, are students leaving reviews here representative of all the students? We don’t know.

At the end, the most striking thing about this tweet is the kind of debate it ignited – especially on Facebook. I have to admit this is a bit disturbing to see many researchers (i.e. guys with a PhD and stuff) not checking at all the source but still trying to figure out why economics would be boring with arguments like “economics uses math for ideological reason, this graph is another proof of that“. I mean, aren’t researchers among the best in the world to check anything before trusting it? For someone claiming that economics is an ideology, that’s not a very scientific way to assess something!

Anyway, this is still a funny tweet, and I guess I’ll eventually retweet it. As an economist I may be “boring“, but I also display some basic form of self-mockery. Better than nothing I guess…