Does prodding people with fines to buy something they don't want improve their standard of living?

Without penalties that people pay under Obamacare, fewer would buy insurance (http://www.cnn.com/2017/03/13/politics/by-the-numbers-cbo-obamacare-repeal-gop/index.html). 

Many people claim that the reduction in number of people buying insurance if the Republicans remove the fines imposed by Obamacare is a reason to oppose the Republican plan. I question the logic.

I doubt the ability of someone else to decide what is best for me. As a classical liberal, I want the government to treat me as though I can decide what is best for me and to treat other people as I want to be treated. When people decide not to buy a product - insurance, caviar, Kirkland jeans, or Air Jordan Sneakers - they reveal that they think purchasing the product is not in their self interests. I don't see how prodding them to act contrary to their self interest by making them pay a tax if they act in their self interest makes them better off; they are buying something that they don't want to buy.  

Strange things can happen when the government restricts individual freedoms

http://www.weeklystandard.com/berkeley-goes-offline/article/2007153 shows that government regulations often have unintended consequences. Classical liberals say that the government has no valid role regulating voluntary contracts between Berkeley and its clients and students.

Do consumers need laws to make automobile companies increase MPG?

This article in CNN claims that one reason for the government to require automobile manufacturers to produce cars that average 50 MPG is that this "standard[s] would save consumers $4,000 at the pump over the life of their cars. That's $1 trillion nationwide -- and more if gas prices rise."

My question is, "Would automobile manufacturers produce cars that average 50 MPG if the legal requirement does not exist? Let's assume that the $4,000 is the present value of the money consumers would save over the lift of the car when it meets the efficiency standard. What would happen if the government removes the standard? I see two possibilities.

1. If the cost to the manufacturers of meeting the standard is less than $4,000, then the manufactures would meet the standard and would increase the price of the car more than the cost and less than $4,000. Suppose that the additional cost is $3,500. By producing the car and charging $3,750 more for the car, both the consumer and producers gain. The consumers gain because the increase in price, $3,750, is less than $4,000, the present value of the money they save on gasoline. Producers gain because the increase in price, $3,750, is greater than $3,500, the additional cost they incur.
2. If the cost to the manufacturers of meeting the standard is more than $4,000, then the manufactures would not meet the standard. Suppose that the additional cost is $4,500. Consumers would not want to buy cars meeting the standard if the price increases by more than $4,500 because the increase in price is greater than the present value of the money they save on gasoline. Producers would not want to sell cars meeting the standard if the price increases by less than $4,500 because the increase in price is less than the extra cost they incur. 

The analysis indicates that the market would meet the fuel efficiency standards if the extra cost of meeting the standard is less than the present value of the money consumers save on gasoline and would not meet the standards if the extra cost of meeting the standard is greater than the present value of the money consumers save on gasoline. We can draw two conclusions.

1. When the cost of meeting the standard is less than the benefit consumers receive, then the market will produce cars that meet the standard without any need for government interference.
2. When the cost of meeting the standard is greater than the benefit consumers receive, then government interference increases the price of cars by more than the benefit consumers receive.

Is peace the best argument for free trade?

https://qz.com/919166/killing-free-trade-will-rob-the-world-of-a-highly-effective-deterrent-to-war/

Solutions to Global Warming

https://www.youtube.com/watch?v=6RsrRpjAGi8

The video begins by pointing out problems of trying to reduce the emission of CO2 to address the problem.

FYI: Levitt identifies 2 solutions, not 3.

Another Prominent Economists Argues Against Trade Restrictions

http://www.vanityfair.com/news/2017/02/donald-trump-china-economics-trade

What do you predict will happen to the price of gasoline?

https://twitter.com/WSJ/status/832596498336595969 states that the gasoline market has the largest glut in 27 years.

1. What is the impact of a glut in gasoline on the price of gasoline going forward?
2. What is the impact on the price of oil going forward? Remember that gasoline refiners buy substantial quantities of crude oil because crude oil is an input used to produce gasoline.

What can government do to ease the costs of free trade?

http://www.cer.org.uk/insights/crisis-capitalism-perhaps-dont-blame-it-globalisation

How can comparative advantage help you cut your to-do list in 1/2?

https://qz.com/907153/the-economic-theory-of-comparative-advantage-can-help-you-cut-your-to-do-list-in-half/

A Defense of Capitalism

http://www.americamagazine.org/politics-society/2017/02/06/confessions-catholic-convert-capitalism

A Conservative Answer to Climate Change

Commentary. A Conservative Answer to Climate Change
by: George P. Shultz and James A. Baker III
Feb 08, 2017
Click here to view the full article on WSJ.com

TOPICS: Environmental Regulation

SUMMARY: Enacting a carbon tax would free up private firms to find the most efficient ways to cut emissions.

CLASSROOM APPLICATION: Students can evaluate whether a carbon tax set at the appropriate level would be yield allocative efficiency. They can also evaluate whether a tax would minimize the cost of a given reduction in carbon emissions. Students can compare a carbon tax and a cap-and-trade mechanism.

QUESTIONS: 
1. (Advanced) Compare the economic efficiency of a carbon tax and cap and trade mechanism. In doing so, set the cap at the same level as the equilibrium level of emissions under a carbon tax.

2. (Introductory) What are the four pillars of the proposed solution?

3. (Advanced) "A levy on emissions would free companies to find the most efficient way to reduce their carbon footprint." However, would the firms with the lowest costs of reducing emissions be the ones that do so?

4. (Advanced) What is a "Pigouvian tax"? Are the authors proposing such a tax?

What happens when bad weather causes availability issues?

http://www.bbc.com/news/uk-38851097

"Tesco is limiting shoppers to three iceberg lettuces, as bad weather in Spain caused 'availability issues'.

"Morrisons has a limit of two icebergs to stop 'bulk buying', and is limiting broccoli to three heads per visit.

"Prices have also risen, with Lidl's iceberg lettuce up to £1.19 from 42p."

This is a textbook case of the types of things that happen when supply decreases. Here are two questions to ponder.

1. Would Tesco and Morrisons need to limit shoppers if they increased price even more?
2. Why do Tesco and Morrisons limit the increase in price and restrict how much shoppers can buy instead of raising price even more?

How is the economy in Romania doing?

http://www.reuters.com/article/us-romania-government-protests-idUSKBN15H0P9

"It joined the European Union in 2007, but it has struggled to combat endemic corruption and remains one of the bloc's poorest members."

Regulation, Pigouvian Tax, or Cap and Trade?

California is using both regulation eliminate reusable plastic bags and a tax to reduce paper and reusable non-plastic bags. Is this combination an efficient way to improve the environment?

Opinion. In California, 'Paper or Plastic?' Is Against the Law

by: Allysia Finley
Jan 28, 2017
Click here to view the full article on WSJ.com

TOPICS: Environmental Regulation

SUMMARY: Supermarkets can no longer give out shopping bags, though the claimed benefits are dubious.

CLASSROOM APPLICATION: Students can evaluate whether California's ban on reusable plastic bags and 10 cent per bag regulated price on paper bags and reusable bags passes a cost-benefit test. Instructors can introduce the concept of the Pigouvian tax and ask whether the marginal social cost of the paper and reusable bags equals 10 cents. Students can also critically evaluate the evidence about whether the regulated fee is inefficient presented in the opinion piece and ask whether evidence is missing from the argument.

QUESTIONS: 
1. (Introductory) Does the opinion piece offer convincing evidence that reusable grocery bags and paper bags are worse for the environment than plastic bags? Are all dimensions of environmental harm caused by plastic bags considered in the opinion piece?

2. (Advanced) "Turns out plastic bags make up a tiny share of litter, less than 1% in most cities, according to a 2013 survey by Environmental Resources Planning. A 2009 litter survey by Keep America Beautiful found that plastic bags make up less than 1% of objects caught in storm drainers." Does this evidence suggest that, considering only litter, plastic bags should not be banned? Does it imply that disposable containers other than plastic bags should be higher than plastic bags on the list of items to be taxed or banned?

3. (Advanced) The requirement that stores charge at least 10 cents for alternative bags was meant to keep retailers from undercutting each other by giving them out free. Does this statement imply that grocery stores are playing a game like a prisoner's dilemma when deciding whether to offer paper bags for free? Does it imply that grocery stores are better off with the 10 cents per bag price?

4. (Advanced) What is a "Pigouvian tax"? Is it efficient for a government to impose a Pigouvian tax on goods that create negative externalities?

What happens when the Rule of Law breaks down?

http://nypost.com/2017/01/10/how-venezuelas-corrupt-socialists-are-looting-the-country-to-death/

Would a government bureaucrat have mandated this solution to CO2 emissions?

This article in QZ.com reports that a firm in India has found new way to reuse CO2 released when it burns coal. Here are some questions to consider.

1. Did the firm spend R&D to "be green" or to increase profit?
2. When would R&D spending and the adoption of new green technologies be greater: when firms may emit CO2 without paying an emissions tax or when they must pay an emission tax for each ton emitted?

What happens when prices are high and barriers to entry are not?

http://www.marketwatch.com/story/cvs-takes-on-mylans-epipen-with-much-cheaper-version-of-an-alternative-2017-01-12

Supply and Demand in Action

U.S. Low Fuel Prices Drive Consumers Away From Smaller Cars
by: Mike Colias
Jan 03, 2017
Click here to view the full article on WSJ.com

TOPICS: Supply and Demand

SUMMARY: While sales of pricey light trucks amid a sustained run of cheap fuel may be good for Detroit's bottom line, the collapse in demand for smaller vehicles has led to job cuts elsewhere.

CLASSROOM APPLICATION: Instructors can put an auto manufacturer's decision about the number of autos to produce for each product in its line in terms of decision making under uncertainty.

QUESTIONS: 
1. (Advanced) What variables do auto manufacturers include in their determining their forecasts of automobile demand?

2. (Advanced) How does the length of time and the cost of adjusting manufacturing to changes in actual demand for different types of automobiles affect the degree to which manufacturers are willing to use forecasts in making production decisions?

3. (Introductory) What is the effect of an auto manufacturer producing too many smaller cars and too few crossovers and trucks on the firm's profits?

Reviewed By: James Dearden, Lehigh University

Minimum wage laws kick in

Minimum Wages Set to Increase in Many States in 2017
by: Eric Morath
Dec 31, 2016
Click here to view the full article on WSJ.com

TOPICS: Labor Economics

SUMMARY: About 4.4 million workers across the country are slated to receive a raise at the start of the year, a shift that may shed light on a debate about the effects of mandated pay increases at the bottom of the wage scale.

CLASSROOM APPLICATION: Students can use supply and demand to examine the benefit to workers of an increased minimum wage and the cost in terms of decreased job creation and increased unemployment. "Economists and policy makers are of two views on the costs and benefits of minimum-wage increases. While the policy puts more money in the pockets of low-wage workers, it also gives employers less incentive to add to their payrolls, leaving some workers behind. A 2014 study from the nonpartisan Congressional Budget Office found raising the federal minimum wage to $10.10 an hour would reduce job creation by 500,000 over two years. At the same time, the report estimated that the increase in the federal minimum wage would raise the pay of 16.5 million workers who kept their jobs."

QUESTIONS: 
1. (Introductory) What is the effect of raising the minimum wage on the willingness of firms to expand the sizes of their operations?

2. (Introductory) What is the effect of raising the minimum wage on the willingness of businesses to invest in automation that eliminates jobs?

3. (Advanced) What is the effect of raising the minimum wage on U.S. imports and on U.S. exports?

4. (Advanced) Describe the tradeoff involved in a state raising its minimum wage.

Reviewed By: James Dearden, Lehigh University

What happens when no one controls an externality

http://www.newsweek.com/china-issues-first-national-smog-red-alert-538121

A better way to address poverty?

http://money.cnn.com/2017/01/02/news/economy/finland-universal-basic-income/