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