The California electricity crisis

Here is a a nice description of the California electricity crisis: https://en.wikipedia.org/wiki/California_electricity_crisis. Here are some money quotes.

"California had a shortage of electricity supply caused by market manipulations, illegal shutdowns of pipelines by the Texas energy consortium Enron, and capped retail electricity prices." (Highlight added from emphasis.)

"the Death Star group of scams played on the market rules which required the state to pay 'congestion fees' to alleviate congestion on major power lines". Who set and enforced the market rules? Answer: a regulatory board in CA.

Cronyism v. Free Markets

This report is an excellent description of the differences between what I mean when I talk about the market system and what most people mean when they talk about crony capitalism. If the market system = capitalism, then crony capitalism not = capitalism.

Rule of law > corruption

http://qz.com/545958/mexico-would-be-an-economic-superstar-without-corruption/

What is the best way to allocate organs for tranplantation?

http://managerialecon.blogspot.com/2015/11/wealthy-buying-kidneys-now-why-not.html

Older posts on oligopoly

http://edlikeseconomics.blogspot.com/search/label/Collusion

Product differentiation

This episode from Planet Money is a good introduction to product differentiation. Is differentiation based merely on brand or perception different than differentiation based on differences in physical characteristics or performance?

Can truth in advertising deceive?

This article reports that the FCC plans to fine ATT for advertising that its data plan was "unlimited" when the plan slowed down data speeds after the customer hit 5GB in the billing cycle.

1. Was the claim that the plan was unlimited true?
2. Was the ad informative?
3. Was the ad deceptive?
4. Did the ad help the consumers make better choices?

A cute example of product differentiation

https://www.youtube.com/watch?v=dD7Eb6u1T9g

Two older posts on monopoly

http://edlikeseconomics.blogspot.com/search/label/Monopoly

Rule of Law

http://www.wsj.com/articles/rule-of-law-is-necessary-for-capitalist-prosperity-1446231687

This letter to the editor of the WSJ does a good job stating that Adam Smith's statement that 'By pursuing his own interest [an individual] frequently promotes that of the society more effectually than when he really intends to promote it' "really only works in societies that are dominated by a 'rule of law' mindset."

I am not sure if I agree with the writer's statements about the cultural divide between rule of men and rule of law. They are intriguing.

Monopolies and Oligopolies are Bad!

So says Robert Reich: http://www.huffingtonpost.com/robert-reich/the-rigging-of-the-americ_b_8447428.html

A monopoly for pot?

If a market for marijuana is good, why would competition be better than monopoly?
http://www.politico.com/magazine/story/2015/11/marijuana-legalization-monopoloy-213312

Costs of the Chevy Volt

This article in Reuters talks about costs of the Chevy Volt. The clever reader can identify total cost, average total cost, average variable and marginal cost, and the profit contribution

http://www.wsj.com/articles/in-west-texas-oil-drillers-keep-pumping-1446254165

When are the variable costs lower:  when "drillers can use one rig to bore vertically down through as many as four layers of oil-and-gas-rich rock and then horizontally through each layer in succession to stretch out the productive life of a well" or when they need a rig for each layer?

Why does the Permian continue to show strength even though the number of oil rigs drilling in the Permian has plunged by about 60% so far this year. What does this imply about marginal costs, average variable cost, and average total cost?

How do higher incomes affect the price of houses?

Apple Pay : One Reason for High Home Prices
by: Laura Kusisto
Oct 26, 2015
Click here to view the full article on WSJ.com

TOPICS: Supply and Demand

SUMMARY: Apple workers live in pricier homes than other residents in the San Francisco Bay Area, and home values are rising much faster in neighborhoods where Apple workers live, according to a Zillow analysis. The gap between homes that Apple employees live in and overall prices in those areas, according to Zillow, has widened since the release of the first iPhone in 2007. The iPhone has helped boost Apple's stock price and, in tandem, employee compensation.

CLASSROOM APPLICATION: Students can evaluate the effect of increasing wages by a particular large employer or industry on home prices in a geographic area. In turn, students can learn that increasing home prices may cause rents to increase as well.

QUESTIONS: 
1. (Introductory) What is the effect of the increasing wages of tech workers on real estate prices?

2. (Advanced) How is the effect of increasing wages of tech worker on real estate prices affected by zoning regulations and readily available land?

3. (Advanced) What is the effect of an influx of tech workers into a region on the willingness of current residents to sell their homes?

Why is limited government good?

“'Think of your least favorite presidential candidate,' the Cato Institute’s Michael Cannon recently pointed out on Twitter. 'Now imagine s/he wins. Doesn’t limiting government power seem like a good idea?' It sure does—especially when you think of the Biffs in our midst" (http://www.realclearpolitics.com/articles/2015/10/22/the_biff_tannen_presidency_128499.html).

Does morality warrant $15 as the minimum wage:

http://www.huffingtonpost.com/robert-reich/the-morality-of-a-15-mini_b_8332580.html?ncid=edlinkushpmg00000090

Are employees who pay less that $15 immoral?
Are voters who elect politicians who oppose increasing the minimum wage to $15 immoral?
Are politicians who vote against increases in the minimum wage immoral?

Who decides what is moral and on what basis?

Could someone disagree with Reich and mount a credible case that paying someone less than $15 is or may be, in fact, moral?

Hillary Clinton on the ills of market concentration

http://qz.com/529303/hillary-clinton-being-pro-business-doesnt-mean-hanging-consumers-out-to-dry/

Do caps on interest rates charged for payday loans help people who borrow at the payday stores?

http://libertystreeteconomics.newyorkfed.org/2015/10/reframing-the-debate-about-payday-lending.html#.Vied_NWrTct

Costs, Profits, Entry and Exit in the California dairy industry

Conditions Sour for California's Dairy Farmers

by: Ilan Brat
Oct 09, 2015
Click here to view the full article on WSJ.com

TOPICS: Production

SUMMARY: California dairy farmers are retrenching amid falling prices and drought in the largest milk-producing state, a shift that could further reshape the U.S. industry by enabling farmers in other states to expand.

CLASSROOM APPLICATION: The article offers a case for students to evaluate about the relationship between costs of production and entry and exit decisions. In California, where due to water shortages costs of producing milk are now high, farmers are exiting the industry, and in the upper-Midwest, where water is plentiful, farmers are increasing production.

QUESTIONS: 
1. (Advanced) Why were California's dairy farms in the past cheaper to run? Why in the past decade have costs been increasing?

2. (Introductory) Why did U.S. dairy exports fall in the first seven months of this year?

3. (Advanced) Why is the California dairy market contracting while the upper-Midwest dairy is expanding?

Reviewed By: James Dearden, Lehigh

Adam Smith and the Invisible Hand

Adam Smith and the Invisible Hand

"every individual necessarily labours to render the annual revenue of the society as great as he can. He
generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. 
By preferring the support of domestic to that of foreign industry, he intends only his own security; and by 
directing that industry in such a manner as its produce may be of the greatest value, he intends only his 
own gain; and he is in this, as in many other cases, led by an invisible hand to promote an end which was
no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his 
own interest, he frequently promotes that of the society more effectually than when he really intends to
promote it. I have never known much good done by those who affected to trade for the public good.

"But man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from
their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour, and shew
them that it is for their own advantage to do for him what he requires of them. Whoever offers to another a bargain
of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the
meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those
good offices which we stand in need of. It is not from the benevolence of the butcher the brewer, or the baker that
we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity, but
to their self-love, and never talk to them of our own necessities, but of their advantages. Nobody but a beggar
chooses to depend chiefly upon the benevolence of his fellow-citizens."

Property Rights in Communist China

This podcast describes property rights in Communist China and how a change in property rights affected economic activity. For a similar account taken from Puritan New England, visit this video.

Friedman on Greed

This video is an exchange between Milton Friedman and Phil Donahue. Friedman states that free enterprise is the only proven method of increasing standards of living and that all societies "run on greed". For evidence that politicians are greedy, read this article.

Friday, April 5, 2013

Why US Farmers are not planting rice

This summary of an article from the WSJ describes the reasons that rice production in the US is decreasing. It would be a good introduction for opportunity cost, supply and demand, and incentives.

Tuesday, February 26, 2013

What was the role of government in R&D for fracking?

This article argues that the government's role in supporting the research and development that led to the technology for fracking is less than President Obama claimed. The discussion illustrates that the profit motive can and does lead private firms to invest in research and development of new technologies, even when the results are uncertain and unknown. The debate about whether the profit motive alone is sufficient is an ongoing.

Watch a lake burn!

https://www.youtube.com/watch?t=19&v=ZxLmfxBRg2E

Externalities

TPP

Here are two opinions.

Con: http://www.cnn.com/2015/10/07/politics/hillary-clinton-opposes-tpp/

Pro: https://www.whitehouse.gov/sites/default/files/docs/20150408_trade_innovation_growth_brookings.pdf and http://gregmankiw.blogspot.com/2015/03/an-open-letter.html.

Here is more evidence that economists generally agree that the benefits of free trade outweigh its cost: http://www.igmchicago.org/igm-economic-experts-panel/poll-results?SurveyID=SV_d68906VNWqVmiGN

Why I don't recycle much

http://www.nytimes.com/2015/10/04/opinion/sunday/the-reign-of-recycling.html?_r=0

A money quote:

"Trying to turn garbage into gold costs a lot more than expected. We need to ask ourselves: What is the goal here?"

Externalities

What is the best way to become a millionaire in Africa?

http://qz.com/494469/africa-is-minting-millionaires-but-the-poor-arent-getting-any-richer/

Wealth of Nations

Revised smog regulations

http://www.nytimes.com/2015/10/02/us/politics/epa-to-unveil-new-limit-for-smog-causing-ozone-emissions.html?_r=0

Externalities

Universal basic income

Is this a better alternative to minimum wage? http://www.fastcoexist.com/3040832/world-changing-ideas/a-universal-basic-income-is-the-bipartisan-solution-to-poverty-weve-bee?partner=qznewsletter

Price controls

Law of supply in action

The law of supply is that the quantity supplied increases as price increases and decreases as price decreases. The announcement by Shell that it is ceasing exploration in offshore Alaska illustrates that the effects on the quantity supplied may not be obvious immediately but, instead, may take years to appear."'Shell will now cease further exploration activity in offshore Alaska for the foreseeable future.'" "[W]hile it had found 'indications' of oil and gas, 'these are not sufficient to warrant further exploration' in the area."

Here is another account that states more explicitly the effect of lower oil prices on drilling and exploration.

Here are two follow-up questions.

1. What will happen (or fail to happen) to the supply of gas and oil in the future as a result of Shells' decision?
2. Would the indications of oil and gas be more likely to be sufficient to warrant further exploration when the price of oil is $100 per barrel or when the price is $40 per barrel? 

Is a market failure better than government intervention?

Critics of Free Market Shouldn't Overreach
by: Greg Ip
Sep 24, 2015
Click here to view the full article on WSJ.com

TOPICS: Behavioral Economics

SUMMARY: It has been a good month for free-market skeptics. In Britain a socialist is the Labour Party leader. Pope Francis condemns markets for "extreme consumerism." Economists are joining them, writes Greg Ip.

CLASSROOM APPLICATION: Instructors can introduce the issue of whether markets lead to unscrupulous behavior or whether markets promote economic efficiency, and whether policy makers in an attempt to correct market failure would be subject to their own behavioral biases. The need for policy intervention in market relies not only the traditional economic arguments based on market power of sellers, asymmetric information, and transactions costs, but also on the behavior of consumers. "Behavioral economics goes further, arguing that people systematically make decisions that economists consider irrational. They save too little for retirement, eat too much fatty food, or don't exercise enough because they put too little value on the future. They pay inflated prices or accept inferior products because of personal biases, limited information or inertia." However, "While the insights of behavioral economics are now broadly accepted, applying them in a practical way isn't straightforward."

QUESTIONS: 
1. (Advanced) Define "behavioral economics." What are examples of non-optimizing consumer behavior? What are examples from studies in behavioral economics that have led to appropriate market regulations?

2. (Advanced) Does evidence that consumers do not maximize by systematically undervaluing future savings from more efficient cars, homes, and appliances imply that government regulation of the energy efficiency of these products is needed to promote economic efficiency? If so, what intervention would correct for consumer behavior?

3. (Introductory) What are examples of government regulators interjecting their biases when setting economic policy?

Reviewed By: James Dearden, Lehigh University

The market system

Want to help the poor people of the world?

Essay. Trade-Offs for Global Do-Gooders
by: Bjorn Lomborg
Sep 19, 2015
Click here to view the full article on WSJ.com

TOPICS: Cost Benefit Analysis

SUMMARY: Cost-benefit analysis suggests the best way to cut world poverty-a focus on expanding trade and preschool while ending fossil-fuel subsidies. "Over the past year, the Copenhagen Consensus Center, the think tank that I direct, asked 82 leading economists to work out exactly how much good could be achieved by investing in the 169 solutions that the U.N. will endorse in a few days. We asked them, in short, to use the standard tools of economics to calculate the costs and benefits of achieving each target."

CLASSROOM APPLICATION: Students can examine whether benefit per dollar spent is an appropriate measure to determine the value on an economic program. Instructors can also present economic methodology for measuring economic benefits of social programs. Value of a statistical life is one measure of the economic benefit of a program that extends life expectancy.

QUESTIONS: 
1. (Advanced) Is media attention a useful guide for the world's problems that deserve the most urgent attention? Are campaigners, activists, and celebrities useful guides?

2. (Advanced) Is benefit per dollar spent an appropriate measure to evaluate and rank economic policies?

3. (Introductory) What criterion should be used to rank projects to aid the world's most-disadvantaged people?

Reviewed By: James Dearden, Lehigh University

Wealth of nations

Cap and trade

Here are two articles that describe China's proposals to reduce pollution emissions. The proposal call for some type of cap and trade program.
http://www.latimes.com/world/asia/la-fg-china-global-warming-20150924-story.html

http://www.bloomberg.com/news/articles/2015-09-25/china-said-to-plan-pollution-trading-expansion-to-cut-emissions 

Surge pricing = equilibrium?

http://newsroom.uber.com/2015/09/the-effects-of-ubers-surge-pricing/

Supply and demand in action

An example of the gains from trade

http://kottke.org/15/09/how-to-make-a-1500-sandwich

Gains from trade

Is this an example of a market answering well the 3 fundamental economic questions??

From TheSkimm "WHAT TO SAY WHEN THERE'S SURGE PRICING…

"That's not ideal. Yesterday, a drug called Daraprim jumped in cost from $13.50 to $750 a pill overnight. The drug – which treats a rare infection but can also be used as part of cancer and HIV treatment – was recently bought by a company called Turing Pharmaceuticals. The drug's more than 60 years old, but Turing decided it wanted to make a big profit off of it (insert 5,000% price increase here). The move has doctors, patients, and even Hillz up in arms. " An economist might ask, "Who is paying the $750?" Here is a follow-up: http://money.cnn.com/2015/09/22/investing/daraprim-aids-drug-price/.

What is the best way to help the poor?

This article argues that the market system is the best way to help billions escape from poverty: https://reason.com/blog/2015/09/21/if-pope-francis-wants-to-help-the-poor-h. It is a response to Pope Francis's criticism of capitalism and "unbridled consumerism" and their role in creating poverty and pollution.

Here is another dim review of Pope Francis's grasp of the ability of free markets, the rule of law, and free trade to help the poor escape poverty: http://www.wsj.com/article_email/pope-francis-unfettered-1442875692-lMyQjAxMTE1OTI2MjQyMjI2Wj.

Wealth of Nations

The Market System and Tickets to See the Pope

This article illustrates how supply and demand determines the price of scarce goods. The questions are good.

Tickets for Pope's Visit Are Hot Commodity
by: Lisa Beilfuss
Sep 16, 2015
Click here to view the full article on WSJ.com
Click here to view the video on WSJ.com 

TOPICS: Supply and Demand

SUMMARY: Some people are trying to resell free tickets to the papal visit for up to $5,000. It's "against everything that Pope Francis stands for," said a spokesman for the Archdiocese of New York.

CLASSROOM APPLICATION: Students can discuss the ethical issues of ticket-lottery winners selling their tickets to see the Pope. Their discussion could include the determination of an ethical criterion to evaluate the issue.

QUESTIONS: 
1. (Introductory) The tickets were free for a reason, said Joseph Zwilling, communications director at the Archdiocese of New York: "We want as many people as possible to be able to see the Holy Father, including people of modest means. Trying to sell the tickets is against everything that Pope Francis stands for." Is it in a poor person's best interest to prevent him or her from selling a ticket to see Pope Francis?

2. (Advanced) Is it ethical for a person to scalp a ticket to an athletic event but unethical to scalp a ticket issued by a Catholic Church lottery to see the pope? Does the ethical criterion to evaluate this question involve the preferences of the institution (in this case the Catholic Church) issuing the tickets?

3. (Advanced) Does preventing the resale of tickets to see Pope Francis reduce the allocative efficiency of the tickets?

Reviewed By: James Dearden, Lehigh University

Airline consolidation, prices, and elasticity of demand

Airline Consolidation Hits Smaller Cities Hardest 
by: Jack Nicas
Sep 11, 2015
Click here to view the full article on WSJ.com

TOPICS: Oligopoly

SUMMARY: Airline mergers over the past seven years have had an uneven effect on travelers. While airline service has changed little at the nation's major gateways, carriers have cut flights and raised fares at smaller airports. "From 2007 to 2014, domestic airfares at the nation's 10 busiest airports, including Atlanta, Dallas and Denver, increased less than 1% on average, while the combined number of domestic seats fell 1.6%. But at the 90 next-biggest airports-including Detroit, Honolulu and Birmingham, Ala.-airlines cut their total domestic seats by 14.5% and raised fares by 6.4%. All airfare figures are adjusted for inflation."

CLASSROOM APPLICATION: Students can evaluate the effect of a change in airline strategy toward larger aircraft and increased service at major airports and decreased service at smaller airports on seat prices.

QUESTIONS: 
1. (Introductory) From 2007 to 2014, during the most recent wave of airline consolidation, the average round-trip domestic flight, including fees, increased nearly 16% and airlines cut domestic seats by 10%. Assume that the cut in domestic seats is due to a decrease in supply. What is the price elasticity of demand?

2. (Advanced) Why have Cleveland airfares risen while Cincinnati and Memphis, Tenn. airfares remained flat or fallen slightly?

3. (Advanced) What will be the effect of shift toward larger jets and a pilot shortage on flights to and from regional airports?

Reviewed By: James Dearden, Lehigh University

Does everyone benefit from free trade?

Here is an article that discusses why some people oppose an agreement to make trade more free.

Auto-Parts Dispute Taps the Brakes on Pacific Trade Deal 
by: William Mauldin and Dudley Althaus
Sep 04, 2015
Click here to view the full article on WSJ.com

TOPICS: International Trade

SUMMARY: A fight over how cars are assembled is pitting North America's auto industry against Japan's in a dispute now holding up a major trade agreement spanning the Pacific.

CLASSROOM APPLICATION: Students can examine the issue of the percentage of auto components produced within the TPP trading bloc on whether the autos are freely traded within the bloc. Two interesting issues are the percentage cutoffs set by member countries, in particular Japan, Mexico, and the U.S. Students can examine the preferences of these countries and the tradeoffs of changing this percentage within the U.S. in particular. "Detroit auto makers in general prefer rules of origin somewhere in the middle, because strict rules could crimp their reliance on global supply chains, while lax rules open Detroit up to increased competition from Asia, said an executive at one U.S. auto maker. But labor groups that represent a swath of the industry, including auto-parts workers, want tight rules to prevent the bulk of auto components from being produced in countries, including China, that aren't preparing to sign on to the labor and environmental standards of the TPP."

QUESTIONS: 
1. (Introductory) What is the tradeoff within the U.S. of increasing the percentage of auto components produced within the TPP trading bloc on whether the autos are freely traded within the bloc?

2. (Advanced) Why are U.S. labor unions pushing to reduce this maximum percentage? Why is Japan pushing to increase this maximum percentage?

3. (Advanced) What is a major concern of Canada and Mexico in setting this maximum percentage?

Reviewed By: James Dearden, Lehigh University

What happens when the cost of injuring someone < cost of killing them?

Here is a gruesome example of the effect of incentives: http://managerialecon.blogspot.com/2015/09/whats-marginal-incentive-to-commit.html

Incentives

Is Last-come first-served more efficient than first-come first-served?

Some Danish researchers say that the change alters incentives and reduces time wasted standing in line. The change, for instance, would remove the need for K-ville.

Role of government

Is a proper role of government to require contractors to give employees at least 7 paid sick days? If so, how about 14? 21? 28? Would Milton Friedman agree?

"Yesterday, [President Obama] said 'Happy Labor Day' by signing an executive order that will require federal contractors to give their employees paid sick leave. Meaning 300,000 workers who previously got zero sick days will now get up to seven" (http://www.theskimm.com/2015/09/08/skimm-for-september-8th-2).

Is heroism rational?

Is a decision made instinctively rational? See http://www.nytimes.com/2015/08/30/opinion/the-trick-to-acting-heroically.html?smid=pl-share&_r=0.

Label = Choice

Two recent articles paint different pictures of the oil market.

No End in Sight for Oil Glut
by: Russell Gold
Aug 21, 2015
Click here to view the full article on WSJ.com

TOPICS: Oil Markets

SUMMARY: When oil prices started to edge down a year ago, most energy mavens thought the drop would be small and short-lived. Instead, the price of crude has plunged by almost 60% from its 2014 peak.

CLASSROOM APPLICATION: Students can evaluate the factors that have caused declining oil prices and examine whether a firm, or in this case oil producer, would optimally maintain output while facing declining prices.

QUESTIONS: 
1. (Introductory) What factors have caused the increasing supply of oil?

2. (Introductory) Why are oil companies suspending deep-water projects?

3. (Advanced) What are possible reasons for an oil producer to increase oil production while facing declining oil prices?

4. (Advanced) What is the effect declining oil prices on the demand for gas guzzlers?

Reviewed By: James Dearden, Lehigh University

Here is a graph from the article.

Here are some questions.

1. Does the graph depict demand and supply or the quantity traded and quantity produced?
2. What would you expect to happen to the price of oil between 2013Q1 and 2015Q2? Click here to see what happened.
3. If revenues for a county increase when it increases production and prices are low, would would happen to revenues when a country increases production and prices are high? If the answer is the revenues would increase, why didn't the countries increase production BEFORE the price of oil fell?
4. When is the quantity supplied greater, when producers expect the price of oil to increase or when producers expect the price of oil to decrease? What do you think expectations were in 2013Q1? 2015Q2?
5. What is the impact on the future quantity supplied when producers suspend work on deep-water projects and push back oil-sands projects?

Oil Prices Soar Amid Lower U.S. Output Estimates, OPEC Article
by: Nicole Friedman
Sep 01, 2015
Click here to view the full article on WSJ.com

TOPICS: Oil Markets, Supply and Demand

SUMMARY: Oil prices soared Monday, marking their strongest three-day rally since Iraq's 1990 invasion of Kuwait, on doubts the global glut of crude would be as long-lasting as many investors and traders had earlier believed.

CLASSROOM APPLICATION: Students can evaluate the cause of Monday's increase in oil prices. They can also evaluate whether a response in oil production to oil price increases would be a movement along a supply curve or a shift in a supply curve. Furthermore, they can evaluate the length of a decline in oil prices required for oil producers to decide to shut down production.

QUESTIONS: 
1. (Introductory) "The newly released federal data confirmed that U.S. oil output has taken a hit from falling oil prices, as new investments have proven unprofitable and some companies have struggled to stay afloat. The number of rigs drilling for oil in the U.S. has dropped by 58% since October...." Does the above report imply that the drop in U.S. drilling is a shift in supply? Alternatively, is it a movement along the supply function?

2. (Advanced) "Many analysts argue that oil prices still need to stay low for an extended period to force more production cutbacks in the U.S. and elsewhere." Why would an extended period : as opposed to a short period : of low oil prices be required for oil production cutbacks?

3. (Advanced) What investment strategy prompted the three-day rally in oil? Why did investors adopt the strategy?

Reviewed By: James Dearden, Lehigh University

What is economics

This vimeo says that economics is about people. The vimeo is a good introduction to economics for students in a principles class even though it focuses more on graduate studies in economics.

economics

Examples of government regulation of externalities

This article in the WSJ reports that the Supreme Court agreed to hear a challenge to the Environmental Protection Agency's requirement that power plants reduce mercury emissions. At issue is whether the EPA should have considered the costs imposed on the power plants when it established the requirement.

This article from The Guardian reports that President Obama plans to reveal new lower lmitis on ozone pollution.

The Camel and the Coase Theorem

This article talks about the City of Richmond's noise ordinances and whether or not they should be altered. The author in the article references the Coase Theorem and proceeds to give the theory and a real world application behind the story. 

Why doesn't the Coase Theorem work with the current ordinance. My understanding is that individuals own the right to silence under the current ordinance and demand that the city send out a trained officer with one of fourteen city-purchased decibel meters when someone violates that right. Couldn't Camel offer compensation to the people adversely affected to purchase their agreement not to demand public action and, thereby, reach an efficient solution?

My understanding is that the variance requested by Camel shifts the property right away from people who own silence to people who own the right to make noise for additional hours of the day. How would this transfer of property rights affect the outcome in the Coase Theorem assuming transactions costs are nil? Would the level of noise change? Who would win and who would lose?

Markets Work

Click here for a blog post discussing responses to prices are driving consumers away from oil towards natural gas as the fuel of choice for heating. It is a nice example of how markets create incentives for socially optimal behavior without the need for government intervention.

A Good Summary of Political Debate

This article in The American is a good summary of the important question in our political debate: "In short, we need to decide if we will continue moving toward "social democracy" ... or back toward American constitutional limited government." The author laments the extent to which Obama and Romney ignored this fundamental question in their recent campaigns.  

Subsidies for education

This article reports that government subsidies to students have increased the price of education. Students should be able to use supply and demand analysis to explain the link and to predict the effect on the quantity traded.

Aid's Role in Rising Tuition Gains Credence
by: Josh Mitchell
Aug 03, 2015
Click here to view the full article on WSJ.com

TOPICS: Education

SUMMARY: More economists believe the federal government's loose standards for student loans are fueling a vicious cycle of higher college tuition prices, similar to what some say happened with the housing bubble.

CLASSROOM APPLICATION: Students can evaluate the effect of federal subsidies for higher education on tuition and the cost and quality of higher education.

QUESTIONS: 
1. (Introductory) What is the effect of federally-subsidized loans and grants to higher education on the demand for higher education? What is the effect of increased demand for higher education on equilibrium tuition set by colleges and universities?

2. (Advanced) What is the effect of federally-subsidized loans and grants to higher education on the quality of services offered by colleges and universities?

3. (Advanced) What is the effect of federally-subsidized loans and grants to higher education on the costs of providing higher education?

Reviewed By: James Dearden, Lehigh University

Supply and demand

Two cheers for sweatshops.

This article from the NYT shows that sweatshops may be the best alternative for many of the workers.

Obama increases minimum wage for federal contract workers

This article reports that President Obama issued an executive order raising the minimum wage for federal contract workers to $10.10. Would this increase tend to increase unemployment in the federal contract worker labor force? Who bears the extra expense of the higher wage? The article is a good introduction to the debate over the minimum wage and the difference in incentives facing government and private business.

Compensation at The Container Store

This article in the WSJ reports on the compensation at The Container Store. The company pays well and works to pay people according to their contribution.