Environmental Economics

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

 

Spahn and Sain and pray for a hurricane*

Your daily demand and supply:

The latest outlook released by the National Weather Service on Thursday forecasts increasingly dry conditions over much of the nation’s breadbasket, a development that could lead to higher food prices and shipping costs as well as reduced revenues in areas that count on summer tourism. About the only relief in sight was tropical activity in the Gulf of Mexico and the Southeast that could bring rain to parts of the South. ...

Yes, the drought has gotten so bad that we are hoping for a hurricane. Meanwhile, in the commodities markets the reduced supply is increasing prices:

An analysis released on Thursday by the United States Drought Monitor showed that 88 percent of corn and 87 percent of soybean crops in the country were in drought-stricken regions, a 10 percent jump from a week before. Corn and soybean prices reached record highs on Thursday, with corn closing just over $8.07 a bushel and soybeans trading as high as $17.49. ...

Since corn is an input for beef, higher input prices decrease supply and increase beef prices:

The withering corn has increased feed prices and depleted available feeding land, putting stress on cattle farmers. A record 54 percent of pasture and rangeland — where cattle feed or where hay is harvested for feeding — was in poor or very poor condition, according to the Department of Agriculture. Many farmers have been forced to sell their animals.

Because feed can account for nearly half of a cattle farmer’s costs, consumers could see a rise in the price of meat and dairy products, experts said. 

via www.nytimes.com

And since corn-fed and grass-fed beef are substitutes, the demand for grass-fed beef will rise leading to higher prices. 

*Taken from the famous poem.

I can think of few things more insulting than accusing me of being a CPA

From the inbox:

We have been notified of your recent participation in income tax infringement  for one of your employers. According to AICPA Bylaw Paragraph 600 your Certified Public Accountant license can be cancelled in case of the fact of filing of a incorrect or fraudulent tax return for your client or employer.

Please be informed of the complaint below and provide your feedback to it within 14 days. The failure to provide the clarifications within this term will result in suspension of your Accountant status.

I chose to not click on the link to the complaint beacuse:

1. I am not a member of AICPA
2. I am not a CPA (in fact, accounting was the only class I ever had to take twice)

In the interest of full disclosure, I am married to an accountant.  i highly recommend it for those who can find an accountant they want to marry.  It significantly reduces my time and excense spent on tax preparation and filing.  Which, of course, highlights the biggest difference between an accountant and an economist; we economists understand opportunity costs*.

*My wife still celebrates when we get a large tax refund, despite my unending efforts to convince her that the rate of return on that money is negative.

Where was Whitehead?

As only Tim may be able to tell from the picture I've been in the Emerald City (working with Craig Landry on an "economic values of coastal erosion management" project).

Daily Demand and Supply: A simple example

"Corn is a major input for retail food," he said. "Corn is used to make feed for all the animals in our food supply chain. As this drought reduces the harvest of corn, that would drive up the price of feed for animals and then in turn meat products."

via news.blogs.cnn.com

A decrease in the supply of inputs increases input prices which in turn increases the cost (decreases the supply) of outputs which increases output prices.

I guess you are going to be seeing fewer updates on Ohio issues*

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via www.dispatch.com

*Stop clapping.

They forgot the opportunistic economists who reacted as if a gift had been placed at their front door

The news over the weekend landed with a thud in most quarters -- Asian carp DNA had been found in water samples taken from Sandusky Bay and the Lake Erie waters of north Maumee Bay.

In a basic translation, that meant the invasive fish had been in those waters at some point, and left its fingerprints, or its tracks in the snow.

The samples had been collected a year ago as part of a wide-ranging study conducted by a team of researchers from Notre Dame, in conjunction with fisheries biologists from Ohio, Michigan, and the federal government.

When the results flashed positive that bighead carp DNA was present in the Lake Erie samples, the reaction to the news covered the emotional gamut.

The myriad partners with a deeply vested interest in the long-term health of the Great Lakes -- fishermen, conservationists, boaters, environmentalists, operators of tourist-related businesses, and lake lovers in general -- shared shock, outrage, sadness, anger, and resentment.

via www.toledoblade.com

Hmmmm...I know a couple of economists who might be able to assess the potential economic losses from the alien invasion.

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...

Sport's Dad update*

I've received a number of inquires lately (is zero a number?) wondering why I no longer provide you with compelling updates about my kids' exploits in sports.  So for those of you who long to hear me proudly and arrogantly brag about my kids, here you go. 

Yesterday, the Official-Oldest-Daughter-of-Env-Econ (OODEE--15 years old) played in a tournament in South Vienna, Ohio.  OODEE's team (The Dublin Storm) went on the win the tournament with a strong team defensive effort.  OODEE threw a 2-hit shutout in the championship game and hit a solo homerun in the third.  We were lucky enough to have the Second-Oldest-Daughter-of-Env-Econ (SODEE) filming from the press box of the football stadium behind the softball field at the time. 

The field is an official softball field, 195ft down the lines and 205 to center.  I estimate this shot went 305ft (210ft after adjusting for Dad inflation).

And yes, John, she runs like her father.

WARNING: You might want to turn down the volume when you watch this as SODEE lets out a toe-curling scream when she realizes what happened.  After that, the video goes shaky. 

 

I know I'm not the sharpest tool in the refrigerator, but for the life of me I can't figure out the basic supply and demand of this headline

The CNNMoney headline reads: Gasoline prices drag down retail sales.  So I thought we were going to get some facts about how high gas prices cause consumers to spend more of their income on gas, due to it's relative price insensitivity, and less income on other goods for which the demand is more price sensitive.  It would be a nice simple illustration of own-price and cross-price elasticities that I can add to my arsenal of examples for econ 101.  But then I read the story...

Gasoline prices dragged down consumer spending for the third month in a row, according to a government report out Monday.

Overall retail sales in June fell 0.5% in the month, according to a Commerce Department report. The decline came as many were expecting growth, with economists surveyed by Briefing.com expecting growth of 0.2%.

Gas prices declined steadily throughout the month, hitting a low of $3.41 a gallon at the end of the month. Prices hadn't been that low since the beginning of January. Gasoline stations' sales fell 1.8% during June.

via money.cnn.com

Huh? 

Gas prices fell and retail sales fell? 

And gas sales fell?

How then did gas prices drag down retail sales? 

What am I missing?

Did other prices rise?  If so, then I might argue that the price of other goods dragged gas sales (since gas prices fell AND gas sales fell).