How do the unemployed spend their time?

An interesting article written by Daniel Hamermesh appeared on Freakonomics during the week.

Last night Jay Leno joked that only 500,000 people attended Bush’s second inauguration, while 2 million were at Obama’s. The reason, so he claimed, is that we now have so many more unemployed people. Good joke, but is it correct? How do unemployed people spend their time? How does unemployment affect time use in the entire economy? What is the lost output from unemployment, and what is the utility loss?

Several of these questions couldn’t be answered until now due to lack of data. A new paper provides some surprising answers. The unemployed use the time freed up from work for pay almost entirely in leisure and personal maintenance; they do no more household work than employed people. Similarly, in areas where unemployment is perennially high, there is less work for pay, more leisure, but no more household production.

But when unemployment suddenly rises, as in a recession, people shift from work for pay to household production; people don’t take more leisure time than before. So if we would measure output to include production at home, we would infer that a recession doesn’t reduce total output by as much as we thought; and perhaps the utility burden of a short recession is not as severe as one might imagine.

Original article

PS3 vs Xbox

PS3 sales in the US declined in November, according to figures released by the NPD Group: Sony sold 378,000 consoles last month compared with 466,000 in November last year. In contrast, sales of Microsoft's Xbox 360 went up to 836,000 from 770,000. Nintendo outsold both by a wide margin - just over 2m Wiis sold, up from 1.35m a year earlier. The figures must concern Sony, though there are variations in market share around the world. Nintendo seems to be winning everywhere, but the PS3 is way ahead of the 360 in Japan, and also easily outsells Microsoft in countries such as Spain, Portugal and Italy, according to Ed Barton, games analyst at UK-based Screen Digest.

Sony's big problem is price, especially in the present economic climate. In the USA, the PS3 costs $399, compared with $199 for the cheapest 360, the hard-drive-less Arcade. In the UK, the 360 Arcade is £129.99 and has gone for as little as £99.99 at retailers such as Zavvi, while a PS3 costs from £280. The PS3's unique selling point, the Blu-ray drive for high-definition (HD) films, looks less compelling now that cheaper standalone players have emerged, and customers are reluctant to shell out for suitably large HD screens that they need to enjoy the full benefit. Microsoft cut 360 prices aggressively in September, but Sony did not follow its lead, telling analysts that it is putting profitability ahead of market share.

The 360's lead in North America will be difficult to overcome, but Barton thinks 2009 will be much better for Sony worldwide: he argues that Microsoft's deep price cuts for the 360 will be hard to repeat, that Sony has strong PS3-exclusive games in preparation, and that the PS3's strength as an HD source will help it in the long term. He is predicting a 60% increase in the PS3's worldwide sales next year, to 16m, more than double his projected Xbox sales of just under 8m units. Few would be surprised if Sony dropped PS3 prices next year, and there is scope for a cheaper version of the console.

The PS3 will probably always be more expensive than the 360, but it is worth looking beyond the headline price. The 360 you really want is not the low-end Arcade edition, but the Premium, which has a hard drive. If you then add the cost of a wireless network adapter and a rechargeable battery for the controller - both of which are standard in the PS3 - the price difference reduces. Bottom line: the console wars are not over yet. What is certain, though, is that Sony has lost the dominance of the market. It is also remarkable that Microsoft has been forced to undercut the Wii (around £180), yet still sells fewer units despite superior graphic capabilities. Microsoft has always argued that software matters more than hardware; ironically, it is Nintendo that demonstrates the truth of that point.($199) is closer to that of Sony's 8-year-old relic than its current-gen upstart.