GOT A QUESTION?From GoBlueRidge.net (Bear Safety Tips ...):
If you are willing to pay $10 to avoid a black bear then your value of statistical life is $6 million:
Apparently, cigar bars are exempt from the North Carolina smoking ban while hookah bars are not. Who would have thought that this would lead to some good old-fashioned class conflict (Smoking ban ...)?
The disparity between cigar and hookah bars "just boggles the mind," said Hookah Bliss owner Adam Bliss -- yes, that's his real name.
"Look at who goes to those places -- generally older, affluent white males," he said. "Besides the fact that this law is creating an elitist association between who can smoke and who can't, they're allowing government to put me out of business, and this is supposed to be a free market economy here."
...
The hookah is a centuries-old device of Middle Eastern and African origin through which flavored tobacco is smoked. Tobacco infused with honey, molasses and other flavors is placed in a bowl at the top of the pipe and heated with charcoal. As smokers inhale through a long, flexible stem, the smoke is pulled through gurgling, cooling water.
Four people can share a pipe for 40 minutes to two hours at an average cost of $10 to $13.
The N.C. General Assembly has passed a statewide ban on smoking in all restaurants and bars.
The bill now goes to Gov. Bev Perdue, who is expected to sign it. The ban would take effect Jan. 2, 2010.
The Urban Dictionary defines "smoking" as "ridiculously *#%@ing hot" among others. How are they going to ban that in bars?
Source: General Assembly bans smoking in all restaurants and bars
Today's Econ 101 topic--actually AED Economics 200 but same diff--the deadweight loss from taxes in otherwise well-functioning markets. In my neverending--futile?--attempt to stay current, I plan to use this example from today's Wall Street Journal:
Senate leaders are considering new federal taxes on soda and other sugary drinks to help pay for an overhaul of the nation's health-care system.
The taxes would pay for only a fraction of the cost to expand health-insurance coverage to all Americans and would face strong opposition from the beverage industry. They also could spark a backlash from consumers who would have to pay several cents more for a soft drink.
The Center for Science in the Public Interest, a Washington-based watchdog group that pressures food companies to make healthier products, plans to propose a federal excise tax on soda, certain fruit drinks, energy drinks, sports drinks and ready-to-drink teas. It would not include most diet beverages. Excise taxes are levied on goods and manufacturers typically pass them on to consumers.
...
The Congressional Budget Office, which is providing lawmakers with cost estimates for each potential change in the health overhaul, included the option in a broad report on health-system financing in December. The office estimated that adding a tax of three cents per 12-ounce serving to these types of sweetened drinks would generate $24 billion over the next four years. So far, lawmakers have not indicated how big a tax they are considering.
Proponents of the tax cite research showing that consuming sugar-sweetened drinks can lead to obesity, diabetes and other ailments. They say the tax would lower consumption, reduce health problems and save medical costs. At least a dozen states already have some type of taxes on sugary beverages, said Michael Jacobson, executive director of the Center for Science in the Public Interest.
Questions to consider:
... I was at the World Bank presenting this (preliminary, i.e., not ready for prime time) paper:
Feel free to download the paper (PDF) and/or presentation (PDF) while supplies last.
I'm thinking there are more benefits somewhere* because $501.7 million cost > $325 million in health benefits.
CORRECTION: Reader Matt kindly pointed out my idiocy. The $325 million is annual. At 10% interest that's $3.25B in total health benefits. And according to my finely tuned math senses that's more than $501.7 million in cost.
*Or self-reported violations aren't subject to BCA?
...while driving smaller and lighter cars saves fuel, “downsizing and down-weighting is also associated with an increase in deaths on the highway,” said Adrian Lund, the [Insurance Institute for Highway Safety] president.
“It’s a big effect — it’s not small,” he said in a telephone interview.
Hoosier mania (Indiana expects to get ...):
State officials are drafting plans to spend nearly $122 million in federal stimulus money to clean up Indiana's aging, overflow-prone sewers and upgrade its drinking water systems.
...
That money, a small share of Indiana's estimated $4.3 billion slice of the stimulus package, will help finance projects ranging from sewer plant expansions to underground sewage storage tunnels that can hold the waste until it can be treated.
But it falls far short of what's needed to fix the antiquated sewers that foul Indiana waterways with a fetid mixture of sanitary waste whenever it rains or snows. Those discharges can cause fish kills and sicken swimmers and boaters.
The U.S. Environmental Protection Agency has estimated that fixing Indiana's sewers will cost $4.5 billion, and the final price tag could go even higher.
...
Indiana is far from alone in its problematic sewers. About 770 cities and towns in 31 states mostly in the Northeast, the Great Lakes region and the Pacific Northwest have the same type of outdated sewers.
The EPA has estimated that fixing those aging sewers will cost $45 billion. But the Wet Weather Partnership, a national coalition of communities with sewer issues, believes the actual cost is somewhere between $100 billion and $200 billion.
The stimulus plan sets aside about $4 billion nationwide for sewer upgrades.
Yuck. My guess is that the net benefits of this component of the stimulus money are positive. And no mention of jobs in the entire article!
I left a comment on a green jobs post the day after pagan celebration of a Christian holy day:
That is why economics is known as the dismal science. We strange economists are most adept at recognizing the opportunity costs of various decisions. No one else really seems to care if opportunity costs offset some, or all, of the benefits of a good idea.
Opportunity cost is a strange notion to some (especially intro micro students) ... it is the value of the next best alternative whenever a choice is made. For example, if I purchase a $1000 flat panel LCD TV, the true cost of the TV is not $1000, but what I could purchase instead (such as $500 in each kid's college education 529 plan [sorry kids]).
In the case of green energy subsidies, if you are an economist then you must at least wonder if this is the best way to spend the money. There are benefits of pushing down the costs of green energy (e.g., improved air quality), and there are opportunity costs. Ignoring the opportunity costs is likely to lead to wasteful spending. Considering the opportunity costs is likely to lead to better social decision making -- regardless of whether the benefits of the subsidies exceed the costs.
The notion of opportunity cost, its recognition and the inevitable result that not all great sounding ideas are really great ideas, is the most important thing that economists bring to many policy discussions. Pointing out the unpleasantantries of opportunity cost is one of the purposes of this blog. The dismal part of the dismal science can not be avoided.
In the latest AERE Newsletter, AERE President Trudy Cameron argues that the ill-named "value of statistical life" should be recalled "willingness to pay for a microrisk reduction." Here is the conclusion:
The consumers of our research need to be steered away from the mistaken impression that economists presume to decide, on behalf of society, the intrinsic value of a human being. If you have any doubts at all about the damage to economists reputations from misinterpretation of the concept of a VSL, or the amount of wasted reputational capital and person-hours at various government agencies every time another sensational article about the VSL appears in the press, please take a look at the seventeen-page compendium of quotes entitled "One Hundred Reasons Why We Should Replace the Value of a Statistical Life (VSL) with Willingness to Pay for a Microrisk Reduction" (http://www.uoregon.edu/~cameron/WTPM/VSL_confusion.pdf).
And let's not forget the VSL on the Colbert Report.
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