The Econophysics Blog

This blog is dedicated to exploring the application of quantiative tools from mathematics, physics, and other natural sciences to issues in finance, economics, and the social sciences. The focus of this blog will be on tools, methodology, and logic. This blog will also occasionally delve into philosophical issues surrounding quantitative finance and quantitative social science.

Sunday, October 29, 2006

Daylight Savings Time and Network Effects

is coming to an end in the US. (Other parts of the world follow similar time conventions; e.g., 'British Summer Time' (BST) in the UK.) Appropriately enough, Tim Hartford, aka 'the Undercover Economist,' in his weekend column in the Financial Times (UK) wrote about the economics of Daylight Savings Time: Undercover Economist: Think inside the box (Oct. 27, 2006).

Specifically, he wrote about what economists call (or network externalities) and what affects, if any, the twice-a-year change to our clocks has on the coordination of both economic and social behavior. One possible network externality of the DST is that one type of profession needing to wake up one hour later (or earlier) will have a feedback effect that causes people in seemingly unrelated jobs to have to coordinate their work schedules even though they have no direct reason for doing so. An example that Tim Hartford used was a financial trader or analyst on the West Coast of the US having to adjust to -- not only the East Coast time at which the NYSE operates on -- the switch caused by the start or ending of DST.

There is an additional complication caused by the fact that some parts of the US (and other countries) don't recognize DST (or its equivalent); e.g., Arizona. Also factoring in regions at the borders of time zones and large time gaps between regions in large countries (e.g., 3 hour time difference between the coasts of the continental US).

Economic research seems to indicate that there are network effects to socio-economic coordination caused by timing conventions within and between regions. The somewhat surprising finding is that -- rather than the timing conventions themselves -- it is often television schedules (which both follow and have their own peculiar timing conventions) that set our social and economic clocks.
Three economists, Daniel Hamermesh, Caitlin Knowles Myers, and Mark Pocock, have devised a way to find out how important these co-ordination effects really are. One of their tools is based on a historical relic: the fact that television schedules in the US vary by time zone. This practice originated in the 1920s, when the Eastern and Central time zones received simultaneous live radio broadcasts, the Central time zone broadcast being an hour earlier on the clock. The sparsely populated Mountain and Pacific time zones had to listen to repeats instead. For no other reason than pure tradition, prime time evening shows screen at 10pm Eastern and Pacific, 9pm Central and Mountain.


Rather depressingly, late-night talkshow host David Letterman outshines the sun in his effect on what people are doing. Push the television schedules an hour later and 5 per cent of people will be watching television later - nearly a third of those actually watching the television. But if sunset is an hour later (because the individual is at the western end of a time zone) only half of 1 per cent of people will watch later television.

That itself might not be surprising, but the effect spills over on to sleeping patterns: the television, more than the sunrise, determines when people get up in the morning. It even governs the behaviour of people who don’t watch much television, since they need to be co-ordinated with everyone else. It seems that co-ordination with other human beings is more important than official time, or even than sunlight itself.


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