June 19, 2015 at 12:28 pm
The Pope recently released his encylcical on the evironment, Laudato si, and man’s relationship to his natural surroundings. While I would not ask a Catholic to dissent (from the Catholic Herald, a British Catholic magazine) from this teaching of the Pope, I do think that as far as the encyclical deals with economics and not just theology, it is important to recognize divergent points of view. In the same issue of the Catholic Herald as the warning agains dissent is this thoughtful dissent that raises some excellent points, points I would raise as an economist, but already written by Philip Booth.
Tim Taylor, in this blog post, reports some interesting international comparisons of minimum wages. What Taylor does not show are comparisons of teen and minority (and especially minority teen) unemployment to overall unemployment.
But how many people actually earn the minimum wage? Take a look at this article by Antony Davies. It will probably be an eye opener for many. Why do you think there is so much back and forth discussion about something that affects so few workers?
June 17, 2015 at 12:55 pm
In the U.S. in the 1970s, Congress banned the export of oil from the US. This restriction on trade did not seem to do much when the US was a new importer of oil–the reason a country is a net importer of a good is because the good is mostly cheaper elsewhere, we valued it more here than other did abroad. With new finds of oil, mostly in the Dakotas, oil in the US will soon be cheaper than in many other areas and we could be in a position to export oil. It will be worth more to those in other countries than it is worth to those in the US. But with a ban on oil exports, such trade would be illegal. The bigger the price difference between here and abroad, the bigger the incentive will be to export oil, whether legal or not.
Take a look at this article in Roll Call by Margo Thorning and Bill Shughart (one of my co-authors), arguing to lift the ban on oil exports.
A little more than an hour south of California captial city of Sacramento, is the somewhat wealthy town of Mountain House. Their only water source is from California’s irrigation system (built with federal dollars), but one with “senior” Riparian water rights. That means that those on that system get to use water first. Somehow, the State of California is closing down their water source to divert it elsewhere, to those who do not have “junior rights.” Here is the news story.
On NPR’s “Here and Now” program was this interview with the Behavioral Economist, Richard Thaler, of the University of Chicago. Behavioral economists reject strict rationality assumptions of economics. They note that people’s behavior sometimes varies from strict rationality in predictable ways. The idea is that there are certain biases in people’s actions and sometimes to the attention that they pay to certain bits of information that causes them to stray, in predictable directions, from the rational choice.
However, before one is concerned about biases away from rational choices, it is very important to understand rational choices and how changes in incentives, changes in marginal benefits and/or marginal costs, cause people to change their behavior in predictable ways. Rational choices provides a first step in understanding behavior. Understanding biases, then get you to the next step, a bit closer to the truth. It we do not understand rational choices, we have missed an important part of the puzzle of human behavior. As Thaler remarks, it was important that economists first focused on predictions based on rational behavior and saw how far that could take them. And it has been pretty far. Understanding biases takes us to the next step.
On NPR’s “Planet Money” program was this episode about a guy who developed an app so people could sell their “free” parking space to the highest bidder. Click on “Listen” after going to the link to hear the program as it aired. There are several great lessons here.
First, if something is scarce, it is costly to obtain–so “free” may not be, no matter what the nominal price label.
Second, if something is held in common (common property resource) with open access to the resource, people will compete for it is some way or another.
Third, this is a great illustration of the “Tragedy of the Commons.”
Fourth, trying to take something out of the commons and establishing some sort of private property rights over it, so that it can be traded, is likely to be met with some push back from many people.
Here at Nicholls, students, faculty and staff pay about $50 a year for parking. However, that just allows the proud owner of a parking hang tag the right to drive around for hours looking for a space. There is no “marginal cost” of parking each day–the purchase of a hang tag is a sunk cost, once made, and the cost of parking again is zero. All you have purchased is the right to compete in a race for parking spots, not for an actual parking spot.
How would you react to the use of this developer’s “Haystack” app for getting a parking space at your campus?
April 22, 2015 at 6:21 pm
We have discussed agricultural price supports in class. Here is a similar program set up by the state of California to monopolize the sales of raisins and keep prices up. When crops are bountiful, the state of California takes a part of each farmer’s crop and holds onto it and sells it to school lunch programs and such. The amount it takes from each farmer is done without compensation, clearly in violation of the constitution.
Here is an article from the LA Times on the Supreme Court case that was just heard. Supreme Court watchers think that they farmer and against the California Raisin Board. Listen to this while you read the article.
Do you think they will side with the farmer or the Raisin Board? Why?
April 21, 2015 at 3:55 pm
I thought I should reintroduce the economist, Norbert Michel, to readers here. Back in January of 2006, Norbert Michel, Gokhan Karahan and I, three economists here at Nicholls, started Bastiat’s Bastions. Since then, other economists, Chad Turner and Shane Sanders added their talents, both as professors here at Nicholls and as contributors to Bastiat’s Bastions. All four are elsewhere now. Norbert is now with the Heritage Foundation, a major conservative think-tank in Washington D.C. Norbert continues to write, now for both Heritage and as a contributor to the online face of Forbes Magazine.
Here is Norbert’s latest contribution to Forbes, an article questioning why the federal government is in housing lending market, increasing instead of decreasing the economy’s and the taxpayer’s exposure to housing market risk. One would think we would have learned something from the Great Recession of 2008-09?
What do you think?
In risk and insurance and economics, there is a problem known as “adverse selection.” The conservative newspaper, The Washington Times, claims that adverse selection, also known as the Death Spiral, is already occurring with the health insurance plans called “ObamaCare,” (read the article), that the policies enacted under the Affordable Care Act are leading to healthier individuals dropping their coverage because the benefits of the policies are too low for the cost, even when you count in their subsidies and the costs of the law’s penalties for not being covered–for defying the individual mandates.
March 29, 2015 at 7:06 pm
It has just been announced that our Spring 2015 Frederic Bastiat Guest Speaker, the Economic Historian, Robert Higgs, who spoke here just two weeks ago, has been named as the winner of the Juan de Mariana Award. This international award was first given in 2007 and Dr. Higgs is the first U.S. winner. The previous and current winners are:
2007 – Luis Reig Albiol (Spain)
2008 – Manuel Ayau (Guatemala)
2009 – Anthony de Jasay (Hungary)
2010 – Carlos Alberto Montaner (Cuba)
2011 – Giancarlo Ibargüen (Guatemala)
2012 – Mario Vargas Llosa (Peru)
2013 – Carlos Rodríguez Braun (Argentina)
2014 – Pedro Schwartz (Spain)
2015 – Robert Higgs (USA)
Join me in congratulating Dr. Higgs in winning this international award from the Insituto Juan de Mariana in Spain.