A couple of entertaining links from Jeff:

The first quarterly economic newsletter for the virtual world of Eve Online has been released. Eyjolfur Gudmundsson, economist at CCP Games, is already pointing an example of real world relevance in the report. The fast pace of the game world relative to the real world makes the weaknesses of using a fixed basket of goods to estimate inflation especially obvious. Instead, Gudmundsson uses a chained price index.

A fixed basket price index looks at the percent change over time in a representative set of goods (based on how much consumers purchase of different goods in the starting year). The idea is that price changes should be weighted by how much of a good is consumed. However, new goods appear and old ones fade, altering the purchasing patterns of the typical consumer so that a basket isn’t representative for long. One solution is to use a chained index, constructing a new basket every year and then “chain” a series of one-year price changed together. The price of each basket is observed for the year it was created and the year after, allowing the percent change in the price level over the one-year period to be calculated. From these one-year price changes, we can find the price change over a longer period. (More info.)

In other news, a pair of economists and a pair of psychologists did a study on dating preferences at Columbia University (Slate). The researchers ran a speed dating service, with men and women randomly paired for four minute dates and asked afterwards if they would like to see the same person again. It appears men prefer looks and women brains and ambition. An unexpected finding was that men discriminate much less than women based on race. And, yes, the most common interracial match was a white guy with an asian girl, per the stereotype, although the reason for it is not that white guys prefer asian girls but that asian girls discriminate less against white guys than they do against other ethnicities.