Wednesday, May 23, 2012
Price Elasticity of Demand Estimates
Here is an article (table is about halfway down the article) listing various price elasticity of demand estimates.
Tuesday, May 22, 2012
SpaceX Launches Commerical Rocket
A private space company SpaceX launched a rocket containing cargo for the international space station today!
Monday, May 21, 2012
Car Inspection Transfers
Here is an interesting no unfortunate policy in North Carolina. In North Carolina, new auto owners are required to have their car inspected for safety and emission regulations, even though they rarely fail inspection. A bill entered the North Carolina House Transportation Appropriations Subcommittee to eliminate this for the first three years, but was defeated in committee. Why? Because it might hurt the garages that service those vehicles. Here is the statement from the article:
"Sen. Jerry W. Tillman, a Randolph County Republican, protested that the measure would hurt garages, tire dealers and inspection stations – whose trade associations had lobbyists in attendance at the crowded meeting room. “'I know a lot of people who do this, and they sell some gas on the side, but most of their profit comes from these inspections,” Tillman said. “We have 7,500 small businesses that do these inspections.'”
Yes, but what about the $28 per vehicle that you are taking away from consumers of new vehicles? To me this is a transfer. The North Carolina state government has decided to take $28 from new auto owners (who do not need the service) and give part to the auto inspection firms and keep part for themselves; think of it as welfare for auto garages.
"Sen. Jerry W. Tillman, a Randolph County Republican, protested that the measure would hurt garages, tire dealers and inspection stations – whose trade associations had lobbyists in attendance at the crowded meeting room. “'I know a lot of people who do this, and they sell some gas on the side, but most of their profit comes from these inspections,” Tillman said. “We have 7,500 small businesses that do these inspections.'”
Yes, but what about the $28 per vehicle that you are taking away from consumers of new vehicles? To me this is a transfer. The North Carolina state government has decided to take $28 from new auto owners (who do not need the service) and give part to the auto inspection firms and keep part for themselves; think of it as welfare for auto garages.
Friday, May 11, 2012
Who Should Inspect Our Food for Safety?
The New York Times has an interesting article on the poultry inspection changes. Specifically, the issue at hand is whether the government should inspect poultry or should private markets inspect poultry? For the last few decades the Agricultural Department has employed poultry inspectors and now is proposing that poultry inspection should be done by poultry processing employees. The poultry industry is in favor of this proposed change, but others are not.
This revolves around a bigger issues that we discuss in Prin. of Microeconomics: should the government or should markets produce goods/services. We conclude that if goods/services are non-excludable and non-rivalrous in consumption, that the government is better to produce that type of good/service. An example I use in class is snow removal from public roads.
So what about food inspection? In terms of the final consumer, food inspection seems to be a public good: once the food has been inspected the inspector cannot exclude customers of the food inspection service; and for the final consumer food inspection also seems to be non-rivalrous in consumption - one customers consumption of food inspection does not diminish another customer from benefiting from food inspection. Sounds like a public good to me. Yet, can a market provide this service instead of the government?
Their are clear costs (employment expenses) and benefits (reduced legal liabilities from lawsuits) to the poultry plant owners of poultry inspection, and there are benefits (wages/salaries) and costs (work) of poultry inspection employees, it seems to me that a market could be used to allocate this type of service. If a newly created firm providing private poultry inspector services were to hire food (in this case poultry) inspectors (most likely the same individuals currently inspecting poultry) and sell those services to poultry processing plants, then the government could eliminate the expense of poultry inspector employees and ultimately shift that cost back to the poultry processing plants. (This is not what the Agricultural Department is proposing.)
The government would still be setting the requirements for what is safe poultry (regulations) and also be available to enforce the regulations via the legal system, but not have to also provide the services themselves and allow the private market to do so. The firms could via contracts list the requirements for poultry inspectors in terms of access and number of employees on the poultry plant line (or this could be regulated by the Agricultural Department if it currently is not).
To me the advantage is that the surplus that is created by this system would be captured by the newly created firms as opposed to being dissipated by the government.
This revolves around a bigger issues that we discuss in Prin. of Microeconomics: should the government or should markets produce goods/services. We conclude that if goods/services are non-excludable and non-rivalrous in consumption, that the government is better to produce that type of good/service. An example I use in class is snow removal from public roads.
So what about food inspection? In terms of the final consumer, food inspection seems to be a public good: once the food has been inspected the inspector cannot exclude customers of the food inspection service; and for the final consumer food inspection also seems to be non-rivalrous in consumption - one customers consumption of food inspection does not diminish another customer from benefiting from food inspection. Sounds like a public good to me. Yet, can a market provide this service instead of the government?
Their are clear costs (employment expenses) and benefits (reduced legal liabilities from lawsuits) to the poultry plant owners of poultry inspection, and there are benefits (wages/salaries) and costs (work) of poultry inspection employees, it seems to me that a market could be used to allocate this type of service. If a newly created firm providing private poultry inspector services were to hire food (in this case poultry) inspectors (most likely the same individuals currently inspecting poultry) and sell those services to poultry processing plants, then the government could eliminate the expense of poultry inspector employees and ultimately shift that cost back to the poultry processing plants. (This is not what the Agricultural Department is proposing.)
The government would still be setting the requirements for what is safe poultry (regulations) and also be available to enforce the regulations via the legal system, but not have to also provide the services themselves and allow the private market to do so. The firms could via contracts list the requirements for poultry inspectors in terms of access and number of employees on the poultry plant line (or this could be regulated by the Agricultural Department if it currently is not).
To me the advantage is that the surplus that is created by this system would be captured by the newly created firms as opposed to being dissipated by the government.
Friday, May 4, 2012
Thursday, May 3, 2012
Behavioral Economics and Public Policy
The last chapter in Mankiw's Prin. of Microeconomics is partly on behavioral economics. While I run out of time to cover this chapter, I thought that I would "tip my hat" so to speak, to the topic. From the Economist, here is a good article on the use of behavioral economics as a guide for public policy as a means of improving social welfare.
Tuesday, May 1, 2012
Living Wage
Interesting article on an American firm in the Dominican Republic paying their employees a "living wage", an amount three times the market wage rate. As the article mentions, what will be interesting is to see if the firm can overcome this cost disadvantage (relative to its competitors) in the long-term.
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