Trump on water and scarcity

This video clip of Trump talking about water in CA prompted this post.  Trump says that CA has "plenty of water" and ships a lot of water to the sea.

We many have "plenty of water" but water is still scare. We cannot freely use all we want where and when we want it.Water does not miraculously irrigate farms or flow into houses to use. Someone must drill for it, dam it, and construct pipelines to carry it. Heck, we can't even get water we want to drink freely. Why else would anyone pay 7-11 to purchase a bottle of water?

When something is scarce, obtaining more of it creates an opportunity cost. Part of the opportunity cost of diverting more water from rivers to farms and houses is the reduction of fresh water into the sea and the environmental impact of the reduction. I think that the EPA has determined that for at least some rivers any further diversion of water would adversely affect the three-inch fish Trump mentions.

Fuel-economy targets

Fuel-Economy Debate Comes to a Head
by: Mike Spector
May 25, 2016
Click here to view the full article on WSJ.com

TOPICS: Environmental Regulation, Externalities

SUMMARY: U.S. regulators soon will kick off a review of future fuel-economy targets, intensifying a debate between auto executives and Washington over buyers' willingness to pay for emissions-cutting technology.

CLASSROOM APPLICATION: Students can evaluate the effect of low gasoline prices on the demand for fuel-efficient automobiles and ultimately the ability of auto manufacturers to meet fuel-economy targets. Instructors can also inform students about the economic efficiency of permitting auto manufacturers to trade fuel-economy credits.

QUESTIONS: 
1. (Introductory) What is the economic rationale for fuel-economy standards?

2. (Advanced) The article notes that regulations allow trucks to meet lower standards than cars, and let car makers falling short of targets buy credits from companies that beat them. Does the possible exchange of fuel-economy credits improve the economic efficiency of reducing carbon emissions?

3. (Advanced) How do the fuel-efficiency targets affect the prices that auto manufacturers set for fuel-efficient and gas-guzzling vehicles?

Reviewed By: James Dearden, Lehigh University

Questions:

1. Are fuel-economy standards an example of command-and-control regulation, corrective taxes, or cap and trade?

1. Is using fuel-economy targets the best way to reduce fuel consumption?

An essay on the sources of economic growth

The Saturday Essay. How the West (and the Rest) Got Rich
by: Dierdre N. McCloskey
May 23, 2016
Click here to view the full article on WSJ.com

TOPICS: Economic Growth

SUMMARY: The Great Enrichment of the past two centuries has one primary source: the liberation of ordinary people to pursue their dreams of economic betterment.

CLASSROOM APPLICATION: The article can prompt students to investigate the sources of innovation and economic growth, and in particular to begin to think about whether liberty, and equality of opportunity or equality of outcomes promotes economic growth.

QUESTIONS: 
1. (Advanced) What factors provide the incentives for innovators and entrepreneurs to combine ideas in the creation of new products?

2. (Advanced) Distinguish equality of outcome from equality before the law and equality of social dignity. Which type of equality promotes innovation and economic growth?

3. (Introductory) What caused the Great Enrichment?

Reviewed By: James Dearden, Lehigh University

Here is the money quote: "The answer, in a word, is “liberty.”

Taxes on sugary drinks

Big Soda Faces Test in Philadelphia

by: Mike Esterl
May 20, 2016
Click here to view the full article on WSJ.com

TOPICS: Taxation

SUMMARY: The U.S. soda industry faces its biggest threat yet in Philadelphia, which is weighing a tax that could raise the price of a can of Coke or Pepsi by more than half and sharply curb consumption of sugary drinks.

CLASSROOM APPLICATION: Students can learn about the rationale for Philadelphia's proposed tax on sugary drinks. They can also evaluate the effect of the tax on the price of sugary drinks in the city, consider whether the tax would be regressive, and also whether the tax would have positive health benefits.

QUESTIONS: 
1. (Advanced) How does the effect of the tax on the price of soda depend on the price elasticities of supply and demand for soda? Would the tax result in people substituting away from sugary drinks and toward other sugary products?

2. (Advanced) Would a city tax on sugary drinks create a black market for soda in Philadelphia?

3. (Introductory) What is Philadelphia Mayor Jim Kenney's rationale for proposing the tax on sugary drinks?

4. (Introductory) Would a Philadelphia tax on sugary drinks be regressive?

Here are some money quotes.

1. "Philadelphia ... is weighing a tax that could raise the price of a can of Coke or Pepsi by more than half ...The beverage industry estimates Philadelphia’s consumption would fall by 79% in the first year and the mayor’s office estimates a 55% drop, if fully passed on to consumers."
2. "'I sense Americans generally and I know Philadelphians don’t like the government telling them what they should and should not do'".

Cuba takes small steps to increase its reliance on the market system

http://www.bbc.com/news/world-latin-america-36375807

What happens when price ceilings are below the equilibrium price?

http://www.theguardian.com/global-development-professionals-network/2015/apr/16/venezuela-economy-black-market-milk-and-toilet-paper