Pete Boettke: I want to eat unicorn for breakfast

This morning had a great time watching Pete Boettke wander around at APEE, complaining that all the breakfast (advertised on the program as "continental breakfast", btw) foods were breads and sugar.  He wanted "protein."

If ONLY there were a system where one could go to some establishment, order exactly what one wanted, and then exchange some valuable tokens for that meal.  We could call it... markets.  And restaurants (there are at least six full service restaurants in this hotel complex...)

But I have to admit that I was with Pete.  Wouldn't it be great if there were just free food, as much as I want, and it had bacon and eggs (the Angus special) and cheese and ham and steak and.... Wouldn't that be great? 

It's so tempting to want that, and to want someone else to provide it.  The difference is that Pete was actually just  joking and having a good time.  Many people really think there "should" be free stuff for everyone. But when they/we try to provide free stuff for everyone, you get people standing in long lines for stuff like toilet paper.  Forget protein...we're talking about toilet paper.  That's not right.  Markets are the best we can do, and they are actually pretty good.

Sharing and Dating

"What's your price?" is a dating site, sort of.  You decide what it is.

I wonder if the name comes from this famous (and apocryphal) anecdote.   I have heard Churchill, but I think "Lord Beaverbrook" is my new favorite source for something that the source never said. 

How different from paying for dinner, the show, and maybe some jewelry?  Yes, actually, it is.

David Zetland and the 20/80 Rule

An amusing video from David Zetland here.

But more importantly he describes the 20/80 rule:

I use the term "20/80 rule" to separate the 20 percent who want to do the right thing from the 80 percent who don't care, but who WILL pay attention to higher prices

If Only We Had Something Valuable We Could Sell.....

An email from a reader.

Seattle's push for a $15 minimum wage isn't the only economic illiteracy we have here on the left coast. Here's an additional slice of annual economic illiteracy from our local zoo. 

1. The zoo needs money (they're always asking for donations at the gate). 

2. The zoo has something very valuable, where the demand is much higher than the supply. So what does a Seattle zoo do (ha!) with this valuable resource? Do they auction it to the highest bidder(s), perhaps with a dutch auction, thereby maximizing some much needed revenue? No, of course not, this is Seattle! 

Since this special fertilizer is limited, [they are going to sell it, right?  no...]  you have to enter a lottery for the chance to purchase... Sigh. Face palm. Double face palm.

NPR does that thing that NPR does. Again.

 An NPR reporter makes all the usual mistakes in describing "price gouging" in taxi rides.  It's as if the case is prima facie:  "The price went up, someone is evil."  Not "I was able to get a taxi ride for a price less than infinity in a snowstorm; it's a miracle!"

I particularly like the "When a $65 cab ride costs $192."  Interesting that God decreed that taxi rides are $65.  Not true for corn, or hog bellies, or oil, whose prices change all the time.

In fact, the Feds actually commanded housing prices to rise, or there would be a market failure.  So it must be okay for some prices to rise compared the-price-yesterday-that-came-from-God.

Why would it be true that a service that sometimes costs one price should always cost that price?  And why pick the low price?  Why is it not, "In slack times, cab ride that really costs $192 is discounted to $65!"

I bet I kin break 10,000 aigs....

Remember that scene from "Cool Hand Luke," where he bets he can eat 100 eggs?  This is a remix, I guess you'd call it, but it's pretty great:  "When it come to the law, NOTHING is understood."



French farmers went one better:  They bet they could break 10,000 eggs.  Outside a tax office.  To protest low prices.  (Note:  not to protest high taxes, to protest low prices.  Even though higher prices would in effect be a higher tax, on everyone else.  Gotta love Gallic logic.)

The French version.  An English translation (sort of). M.K. offers this interpretation (edited a bit, don't blame him):

It announces breathlessly that some goods will be on sale from June 26 to July 30.  Note that also that certain "economic zones" are excluded from this, and their sales dates are different, being carefully rotated in accordance with the....MASTER...PLAN! If you live in Guyana, you'll have to wait until October 3 for your cheap socks. 

The paragraph below the list notes that, thanks to the Economic Modernization Act (lol) the number of days for permitted discounts has been restricted. Now you know why the French drink, and smoke those ridiculous cigarettes.

And then, M.K. offers this lagniappe: Apparently in highly competitive or struggling businesses, the final weeks leading up to the sale period is a time of rising bankruptcies due to shrinking cash flows amplified by consumer hold-back and retailers' inability to lower prices to save their bacon...  

Moral Licensing

People compensate.  If they save water, they use more electricity, because their "budget" of moral behavior is increased.  It should be possible to decompose this into "price" and "moral income" effects.  In this case, the weekly feedback raises the "price" of using water, but substituting away from water results in using more electricity.  Since they are not substitutes (or are they?), it sounds like an income effect, right?


For better or for worse? Empirical evidence of moral licensing in a behavioral energy conservation campaign 

 Verena Tiefenbeck et al. Energy Policy, June 2013, Pages 160–171 

Abstract: Isolated environmental campaigns focusing on defined target behaviors are rolled out to millions of households every year. Yet it is still unclear whether these programs trigger cross-domain adoption of additional environment-friendly behaviors (positive spillover) or reduced engagement elsewhere. A thorough evaluation of the real net performance of these programs is lacking. This paper investigates whether positive or perverse side effects dominate by exemplifying the impact of a water conservation campaign on electricity consumption. The study draws on daily water (10,780 data points) and weekly electricity (1386 data points) consumption data of 154 apartments in a controlled field experiment at a multifamily residence. The results show that residents who received weekly feedback on their water consumption lowered their water use (6.0% on average), but at the same time increased their electricity consumption by 5.6% compared with control subjects. Income effects can be excluded. While follow-up research is needed on the precise mechanism of the psychological process at work, the findings are consistent with the concept of moral licensing, which can more than offset the benefits of focused energy efficiency campaigns, at least in the short-term. We advocate the adoption of a more comprehensive view in environmental program design/evaluation in order to quantify and mitigate these unintended effects. 

Nod to Kevin Lewis

Prices and Equilibrium

Two nice posts by my good friend Pete Boettke on prices, equilibrium, and the functioning of markets.

Prices doing their job

The function of "market agitation"

I have become much more sympathetic to the Austrian view of the value of equilibrium theory.  James Buchanan had this right:  if you ALMOST become a pure subjectiviist, and if you consider the tendency toward a single price rather than simply assume single price, you can have the best of both worlds.  Jim's best writing on this, Cost and Choice, is undervalued.  With subjectivism and "agitation," it is possible to stay in the world of formal economics, and not go out into the kaleidic absurdism of Ludwig Lachmann.  (Though Don B. suggests even LL should be appreciated).

Had coffee with Pete and young Coyne yesterday.  A pleasant time at the Dunkin' Donuts in Fairfax.

 

Our "leaders" missed the Econ 101 Prereq

Lots of basic classes have prerequisites.  Why not public office?  As in, you can't be governor of a state unless you have taken (and PASSED) basic economics.

Anonyman sends this delightful tidbit:

Drivers in New Jersey faced 1970s-style gasoline rationing imposed by Gov. Chris Christie, while in New York, Gov. Andrew Cuomo said that the Defense Department would distribute free fuel from five mobile stations. But that effort backfired when too many people showed up.

Rationing makes sense, given that Gov. Christie has decided to prevent the price system from allocating resources.  Like all Republicans, his authoritarian and life-arranging instincts come out in times of crisis, and like all Republicans he'll make up crises if he has to, justify state control of pretty much everything.  But at least that's possible.

Governor Cuomo just has no conception of how things work, though.  Knowing that people really, really need this stuff, we'll...give it away for free!  What could possibly go wrong?  We don't NEED no stinkin' rationing.  Except that if the price is zero, the costs of non-price rationing are very high.  There is no saving, and there is no reason to believe that the people who need gas actually get it.

And Mayor Bloomberg?  Completely hopeless, a statist to the core. 

Officials said they were trying to get help where it was needed. “One of the problems is that when you have lots of different agencies, it takes a while for them to get coordinated,” Mr. Bloomberg said at his briefing, adding that he understood how high the tensions were in the Rockaways. “Somebody this morning screamed at me that they could not get coffee.”

Because they were waiting for "lots of different agencies" to "get coordinated" to provide coffee.  If only there were a system that would allow people to get the things they need without those things being provided by government.  We use that system every day during normal times, and we get lots of stuff from groceries, gas stations, and drug stores.  But when there is an emergency, we use a whole dog's breakfast of different laws to prevent the market system from helping us when we need it most.

Gas Gouging!

Great video.  There's nothing complicated here.  We prevent markets from working, by restricting price.  And then we blame markets for failing, because at that price there's a shortage.  Amazing.

 

Price Gouging as a Rationing Device: Sandy Edition

Zoe Chace did a nice job with this, I thought.  I wish she would have given a little more of my explanation, but the stories are good.  She gets it.

The Sistine ain't so pristine

The Sistine Chapel is not for the faint of heart. While some may swoon over the over the top artwork, others complain of heat, smells and pick-pockets.

The Italians are having a logic-free emotional debate about the situation. One guy calling to limit the "drunken herds" (5 million visitors a year), the other side saying that limiting the numbers or putting time limits on visits is unthinkable.

People, all they have to do is raise the price and things will sort themselves out, but that move is apparently not in the Italian tool box!

This would be even funnier if it weren't for the fact that the hordes and their effluvia may be damaging the artwork.

Oh well, if they don't man up and cut the crowds one way or another, I know exactly who they should get to try and restore the Chapel's artwork!