From Nick Rowe (HT MR) (see also):
[L]et T be the time everybody else chooses, and let S be the time the sun chooses. So my reaction function is t = R(T,S). Assume that dR/dT>0, dR/dS>0, and dR/dT+dR/dS=1. What this means is that if everybody else gets up one hour later, I will get up (say) 45 minutes later. And if the sun gets up one hour later, I will get up (say) 15 minutes later. But if everybody else and the sun all get up one hour later, I will get up one hour later too. For example, t = 0.75T + 0.25S could be a simple linear reaction function. Now, assume everyone else has the same reaction function as me. We solve for the symmetric Nash equilibrium, where t = T. The answer is T = S. Everyone follows the sun, and so I’ll follow the sun too. * * * In equilibrium it doesn’t matter what our watches say, and so Daylight Savings Time makes no difference to what we do.
Which is not what happens.
Because everyone hears the government’s suggestion, and knows that everyone else hears it too, and so on, it acts as a focal point to coordinate our expectations about when meetings will take place.
[I]f the government suggests we all set our watches back two hours, or maybe three or four, we decide to ignore it, and know that everyone else will too.
What with the Tea Party, and all, how about some civil disobedience at something less than the two hour level? Why should we alter when we get up just because our corrupt government, controlled (in this case) by the energy conservationists, tell us to? Let’s retake the morning, reclaim sunrise!
And now onto monetary policy. (Read the whole thing.)