Environmental Economics

Who says administration gets in the way of research*?

From the inbox:

I am pleased to accept your paper...“Inattention to Search Costs in the Gasoline Retail Market: Evidence from a Choice Experiment on Consumer Willingness to Search”...I believe it makes an interesting contribution to understanding consumer fuel purchase behavior. To increase the potential impact of your paper and the Journal, if you have a copy of this paper posted on-line please note on it that it is now forthcoming in the American Journal of Agricultural Economics.

OK, here's the citation and link to a slightly older version of the paper:

Castilla, Carolina and Haab, Timothy C., Inattention to Search Costs in the Gasoline Retail Market: Evidence from a Choice Experiment on Consumer Willingness to Search.  Forthcoming American Journal of Agricultural Economics.

*Congratulations to my advisee (and lead author) and assistant professor of economics at Colgate, Carolina Castilla.

We're part of a new enlightenment

From the inbox:

I'm following up with you about the list EconomicsDegree.net has published of the Top 100 Sites for Enlightened Economists.

I emailed you last week to let you know you'd been nominated, and I'm pleased to report that your site made the Top 100. You can view the list here: http://www.economicsdegree.net/enlightened-economists/

...

While our site is geared toward prospective students in economics, and they will no doubt find this list to be useful, we also published it to benefit all readers interested in economic topics. Congratulations, and thanks for maintaining such a useful site!

And from the description of env-econ:

This blog aims to look at more of the microeconomic ideas that can be used toward environmental ends. Bringing to bear a large quantity of external sources and articles, this blog presents a clear vision of what economic environmentalism can be.

via www.economicsdegree.net

Small quibble: I prefer to think of myself as an environmental economist rather than an economic environmentalist. 

The latter just sounds like a cheap tree hugger.

Oh, and we're rated ahead of Kaaaaahhhhhn.

I assume that means we're more enlightening.

Just sayin'.

Apparently I haven't been paying attention to the price of textbooks

I went to submit my order today for a textbook for the Principles of Micro class I am teaching in the Spring.  I chose Mankiw's 6th edition because 1) I am lazy and all of my notes are from Mankiw and 2) I am lazy.  So here is what I found when I was looking up the ISBN #:

Principles of Microeconomics, 6th Edition
N. Gregory Mankiw Professor of Economics, Harvard University
ISBN-10: 0538453044  
ISBN-13: 9780538453042 
528 Pages  Paperback 
©2012     Published
College Bookstore Wholesale Price = $163.75

$163.75. 

Really? 

I may have to change my stance on price gouging.

Daily Demand and Supply: On the elasticity of (for?) demand for NFL football

Steve Young--Pro Football Hall of Famer, BA in International Relations and JD from BYU--invokes the elasticity of (for?) demand at the :39 second mark of the video below to explain why the NFL has little incentive to move quickly to end the NFL referee labor dispute. Reasonable economic argument for a sports announcer.

 

It is never too early to begin thinking about Fall semester

For your intro classes, from the WSJ Weekly Review (Lobster glut slams prices):

TOPICS: Antitrust, Cost Analysis

SUMMARY: Lobster prices in Maine have hit a 30-year low for this time of year, prompting some lobstermen to tie up their boats at port. The reason: The warm winter has led to an oversupply of the crustaceans. The article offers two interesting points about operation decisions and lobster prices. First, current lobster prices may be below the shut-down price. "I'm looking at all their boats as we speak," he said Friday when reached at the co-op, which sits across the bay from Bar Harbor "They all have a cut-off point [in price] where they can and can't fish," he said. "It's an impossible situation." Second, an alternative explanation for the decision by lobstermen not to fish: collusion. "Frankly, there were some fisherman that were trying to bully some people into not fishing. Most of it was veiled threats, and as soon as we started hearing about it, I made sure patrol was aware," said Mr. Keliher. On Monday, Mr. Keliher issued a statement warning that threats to cut lobster traps loose or force lobstermen to stay in port "will be met with targeted and swift enforcement." He added that any attempts to impose a broader fishing halt "may be in violation of federal antitrust laws."

CLASSROOM APPLICATION: The article fits well in three topics: the analysis of shut-down prices for competitive firms; supply and demand explanations of low lobster prices; and the analysis of collusion in the Cournot model.

QUESTIONS: 
1. (Introductory) What factors have caused this summer's low lobster prices?

2. (Advanced) What is the "shut-down price"? Have lobster prices dropped below this price?

3. (Advanced) Are lobstermen colluding in their decisions not to fish? If so, what techniques are lobstermen using to enforce the collusion?

Reviewed By: James Dearden, Lehigh University

 

What is the name of this auction?

Sometimes my friends make blogging easy. From the inbox:

I'm taking a flight on Delta tomorrow and checking in early online. Toward the end I get a question about whether I would be willing to give up one leg for a different connection - for compensation of course. There were no details on the alternatives, just a question about whether I would be amenable to the idea and, if so, the gate agent would provide alternatives at the gate. I replied "yes" then I got a screen that asked for my WTA as an open-ended question, with a qualifier that Delta would be taking the lowest bids first. Ah, I have a new found respect for Delta...

The economics of blockade running

Compensating differentials:

The pay that allowed all that high living sounds like modern drug-running. Midway through the war, a captain could make the equivalent of $100,000 today for a single voyage, [Stephen Wise, a historian, director of the Parris Island Museum and author of “Lifeline of the Confederacy: Blockade Running During the Civil War"] said. A first officer might make the modern equivalent of $20,000 to $25,000 and a simple crewman $5,000. A handful of crews were Confederate military and paid much less. A Confederate Army private was making the equivalent of about $254 a month.

The sky-high war prices on the goods brought in, and the valuable commodities such as cotton that were shipped out, made for huge profits when a voyage succeeded. Cotton bought here for pennies a pound could be sold in Britain for as much as a dollar. The companies that owned the ships, many of them British ventures, could reap as much as a 100 percent return on the investment with a single run. ...

The chance of getting through on any given run was about 75 percent, Wise said.

via www.newsobserver.com

Costs and benefits of kids

The WSJ's "Numbers Guy":

Parents and would-be parents might be relieved to hear that last week's widely reported government figure estimating the cost of raising a child—around $300,000 over the first 17 years for middle-income, two-parent families—is, according to several economists, wide of the mark.

The bad news is it may be a severe underestimate. The U.S. Department of Agriculture's report leaves two things out of account. For a start, it doesn't reflect unpaid time spent on parenting, including income forgone by parents who cut back on work hours to care for their children.

Plus, the hit to parents' wallets doesn't end when the child turns 18, as the parents often still provide housing and food as well as pay for college. These could add up to hundreds of thousands of dollars in additional costs.

"The real costs of raising a child for a moderate-income family"—including forgone income, college for those who attend, and the so-called opportunity cost of not investing the money—"would be closer to $900,000 to age 22 than the reported $300,000 expenditures to age 18," says John Ward, an economist and the president of John Ward Economics, based in Prairie Village, Kan., which consults on legal disputes for plaintiffs and defendants.

(The $300,000 estimate takes into account expected inflation. In 2011 dollars, the price tag for a middle income family is $234,900.)

The rest of the article describes a bit about where the numbers come from (It is odd that they include expected inflation. It is best practice in benefit-cost analysis not to include inflation for future streams of money).

The end of the article speculates about the difficulties of measuring the benefits of kids. Another approach is measure benefits with revealed preference and some simple assumptions. Since we observe people having kids then the expected benefits must exceed the expected costs (my line is always that the costs of kids is high and the benefits are just a little bit higher :). Assuming that the benefits of additional kids are diminishing then the marginal benefit of the 2nd (or whatever the average currently is) kid is zero. If you assume a demand elasticity of 1 and linear demand then the consumer surplus benefit of two kids is equal to $234,900.

I'm sure I've destroyed some tenets of the most basic economics of the family. So, refinements/corrections to this number are most welcome!

Ohioans want their double-dividend

Theory...

The double-dividend hypothesis' suggests that increased taxes on polluting activities can provide two kinds of benefits. The first is an improvement in the environment, and the second is an improvement in economic efficiency from the use of environmental tax revenues to reduce other taxes such as income taxes that distort labor supply and saving decisions.

...in practice:

Ohio voters back Gov. John Kasich’s proposal to raise taxes on shale fracking and use the revenue for an across-the-board state income tax cut, a new poll released today indicates.

“This looks like an issue on which Gov. Kasich has the voters behind him,” said Peter A. Brown, assistant director of the Quinnipiac University Polling Institute, which has been taking surveys in Ohio for several years.

Sixty percent approve of Kasich’s plan, 32 percent are against, the poll shows.

The Republican governor’s proposal is stalled in the GOP-controlled legislature, with several lawmakers worried about increasing any taxes. Kasich has said with energy companies poised to pull billions of dollars worth of oil and gas from the shale underneath Ohio, they can stand to pay more than 20 cents a barrel.

The measure gets support from voters of all stripe: 54 percent to 36 percent among Republicans, 65 percent to 28 percent among Democrats and 63 percent to 29 percent among independents.

via www.dispatch.com

Unintended consequences of higher cigarette taxes

USAToday:

American smokers have shifted to pipe tobacco and large cigars since federal taxes on cigarettes were increased in 2009, a new government report concludes.

Sales of pipe tobacco and large cigars, both taxed at a lower rate, have soared as smokers have adjusted their buying habits to the new price structure.

The shift cost the federal government $615 million to $1.1 billion in uncollected tax revenue from April 2009 to September 2011, the report said. It did not estimate how much individual states may have lost in uncollected taxes.

"That's real money and a tax avoidance scheme Congress ought to be interested in stopping," said Gregg Haifley, associate director of federal relations at the American Cancer Society's Cancer Action Network. "It's also counterproductive for the public health benefit of tobacco taxes."

Monthly sales of pipe tobacco increased from about 240,000 pounds in January 2009 to more than 3 million pounds in September 2011, the Government Accountability Office found. Monthly sales of large cigars more than doubled, from 411 million pounds to more than 1 billion pounds.

Pipe tobacco is used increasingly to make relatively inexpensive cartons of roll-your-own cigarettes in machines installed in neighborhood smoke shops around the nation.

Congress raised taxes on roll-your-own tobacco and cigarette packs in April 2009, making them equal. It enacted a smaller increase for pipe tobacco.

Congress began taxing small cigars at the same rate as cigarettes. Manufacturers of small cigars increased the weight of many of their products, so they would qualify as lower-taxed large cigars, even though they often are just slightly larger than cigarettes and have filters. Premium handmade large cigars retail for $3 to $20 or more each, but "smaller factory-made cigars that meet the legal definition of a large cigar can cost as little as 7 cents per cigar," the GAO reported.