Saturday, July 30, 2011

Playing by the real rules of Monopoly. (Game Night)
Emission trading begins to go international. (Economist) For any "cap and trade" scheme to be effectively binding, it must be globalized; else I still prefer a tax, for that and other reasons.
Gender bias and agricultural technology. (Economist)
Media - back to coffee houses? (Economist)

Wednesday, July 27, 2011

A sad outcome for property rights theories of environmental protection.

Quick summary: Tim DeChristopher, environmentalist and former economics major at Utah bids on oil and gas permits and wins some while pushing the prices of others up; gets sentenced to 2 years in prison.
I've long thought that if environmentalists wanted to reduce environmental damage, one they should do is bid on (and buy) some of the permits to extract resources or otherwise pollute the environment. If the government's position is that this is criminal behavior, then it strengthens the case for Pigouvian taxation.

Tuesday, July 26, 2011

Some Random Links

An interesting short piece on the Isreli-Palestinian conflict (Haushofer, et al.)
A shamelessly self-interested link - somebody buy our house!
Is there a great divergence? (Rodrik)
Summary of an interview by Felix Simon with Larry Summers. Sentences to ponder:
The Treasury bond rate, Treasury note rate for ten years is 2.85 percent. Nobody is failing to invest because 2.85 percent is too much. They are failing to invest because there are no customers in their store. They are failing to invest because their factories are sitting empty. They are failing to innovate because they’re not sure how large the market for the product will be.

We don't need a C.E.O. A country is not a business. We need a policy expert. (Economix)
Economics for kids? (Freakonomics)
Banerjee on Poverty. (Economist)
Debt impacts of new policies GWB vs. BHO.

Price effects of WalMarts versus Sam's Clubs

An interesting discussion on Freakonomics. Basically, what is happening is that when a WalMart enters a market, existing retailers compete, and prices fall; when a Sam's (or Costco) enters the same market, prices rise. Why?
Phillips makes the argument that it's a mostly a product differentiation issue, i.e. that the monopolistically-competitive retailers are competing by distinguishing on variables like appearance, cleanliness, service, and convenience. I don't buy it, because they already do that with a WalMart around.
Instead I think it has to do with the pricing strategy of the club stores vis-a-vis non-club stores, and which consumers are attracted to each (and revealed as such to the competitors). Club stores price discriminate. They charge a membership fee, and then charge lower prices on marginal purchases. Smaller grocers don't have the size or clout to charge membership fees. Thus, they attract much more price-elastic consumers. The remaining consumers are considerably less responsive to price. At the same time, these leftover consumers are revealed to value the intangibles like service and appearance more. Small stores are free-riding on the informative role of the membership fees.