Economics @ ITT

Want to fight climate change? Get rid of $1.9 trillion in energy subsidies.

Posted in economics, environment by ittecon on March 30, 2013

What’s the simplest way to tackle global warming? Make sure that fossil fuels are priced properly and not subsidized. Is it really that easy? That’s the core idea behind a large new report from the International Monetary Fund, which argues that the world “misprices” fossil fuels to the tune of some $1.9 trillion per year.

via IMF: Want to fight climate change? Get rid of $1.9 trillion in energy subsidies..

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Should smokers pay more for health insurance?

Posted in economics, environment, externalities, Policy Issues by ittecon on March 29, 2013

The answer, should you want to know, is an unqualified yes.

Like lots of people who enjoy their vices, smokers like to invoke their constitutional right to light up. I don’t dispute that. So feel free to get lung cancer, American freedom fighter, but don’t forget that the rest of us are sucking up your second-hand smoke and helping foot your considerably heftier medical bills.

via Should smokers pay more for health insurance? – latimes.com.

John Locke, Prices, and Hurricane Sandy

Posted in economics by ittecon on March 6, 2013

Although I find the content of the discussion compelling, but I feel that it is a mistake to say that the best rationing mechanism is to rely on the market. It presumes that the one with the highest ability to pay for a good will put the use to the best use. Here is the problem as I see it in a hypothetical tale.

I am an inventor, but I am poor and I have little access to capital. I have a concept for the invention a good that will benefit society (and perhaps myself along the way). The material for this good costs more than I can afford, yet other more affluent persons can afford this material and routinely “waste” it. Because I do not have access to an infrastructure of venture capital (and why should I allow them to benefit of the backs of society just because they happen to have funds available).

Given the structure of the market, this item may not be developed or arrive late to market. Classical economics solves this by claiming that this will magically be introduced into or discovered by markets because of some market omniscience.

Anyway, these guys do sum up Locke’s position and the Libertarian vantage. Give it a listen (or read the transcript). The basis of discussion  is hinged on Locke’s The Political Writings.

Mike Munger of Duke University talks with EconTalk host Russ Roberts about the gas shortage following Hurricane Sandy and John Locke’s view of the just price. Drawing on a short, obscure essay of Locke’s titled “Venditio,” Munger explores Locke’s views on markets, prices, and morality.

via Munger on John Locke, Prices, and Hurricane Sandy | EconTalk | Library of Economics and Liberty.

Price Discrimination is All Around You

Posted in economics by ittecon on March 6, 2013

A nice article on price discrimination to follow up yesterday’s topic.

Price discrimination, more euphemistically known as differential pricing and dynamic pricing, exploits the fact that in any transaction each customer has a different “willingness to pay.”

What is “willingness to pay,” and how does the seller determine it?

via Price Discrimination is All Around You | 33 Bits of Entropy.

Instituting Price Discrimination

Posted in economics by ittecon on March 5, 2013

Safeway recently introduced a new personalized shopper program called “Just for U” which extends additional coupons and savings to the company’s Club Card holders based on their product interests and purchase history.

Safeway supermarkets leverages information captured through their loyalty programmes, offering deals for certain users. This is the opposite of what Orbitz did to Mac users. What is more interesting to me is that more ecommerce sites don’t do this. In the B2B world, it is common to offer negotiated contract pricing. Is it only a matter of time until the price I pay for a book or a shirt is different to the price you pay? Given exhibited behaviours, a business can get a better sense of price elasticity of demand and so can charge accordingly.

Ref Loyalty Pays Off for Safeway – Think customers: The 1to1 Blog.

Why You Should Pay For Sex: The Economics of Prostitution

Posted in economics by ittecon on March 1, 2013

Why you should pay for sex and why you’re being unethical if you don’t.

via Why You Should Pay For Sex: The Economics of Prostitution ‹ TravelSexLife.

Why we don’t eat horse meat: It’s economics

Posted in economics by ittecon on February 26, 2013

A three-ounce serving of roast horse has 149 calories, 24 grams of protein, and five grams of fat. The same amount of beef tenderloin has 179 calories, 24 grams of protein, and nine grams of fat. Horse milk, which some Central Asians drink in fermented form, has one-third the fat of cow’s milk.

via Why we don’t eat horse meat: It’s economics – Business on NBCNews.com.

If Drug Companies Could Charge Higher Prices, Why Arent They?

Posted in economics, microeconomics by ittecon on February 15, 2013

What the hell is economist Douglas Holtz-Eakin smoking when he implies that pharmaceutical companies are not maximising profits?

Economists usually believe that companies try to make as much money as possible. This is why readers of an NYT article on plans to reduce Medicare payments for drugs might have been surprised…

via If Drug Companies Could Charge Higher Prices, Why Arent They? | Beat the Press.

Quinoa—The Other White Meat

Posted in economics, externalities by ittecon on January 18, 2013

The appetite of countries such as ours for this grain  has pushed up prices to such an extent that poorer people in Peru and Bolivia, for whom it was once a nourishing staple food, can no longer afford to eat it. Imported junk food is cheaper. In Lima, quinoa now costs more than chicken. Outside the cities, and fuelled by overseas demand, the pressure is on to turn land that once produced a portfolio of diverse crops into quinoa monoculture.

via Can Healthy Food Eaters Stomach the Uncomfortable Truth About Quinoa? | Alternet.

Another real life supply demand where the affluent bid up the price staple products of the poor. Many if not most of these people are likely otherwise conscientious consumers, at least to some extent, but they fail to see the larger picture. Save a cow, imperil a human.

McDonalds Testing Mighty Wings In Chicago

Posted in economics, microeconomics by ittecon on January 7, 2013

An example of supply meets demand.

Prices for chicken wings have been climbing over the past year, reflecting an increase in the number of restaurants serving them, said David Harvey, an agriculture economist who specializes in poultry and eggs at the U.S. Department of Agriculture. In December, the cost of wings in the wholesale market in the Northeast was 26 percent higher than a year ago. Wings sold for $1.90 a pound that month, compared with $1.30 a pound for boneless, skinless chicken breasts.

via McDonalds Testing Mighty Wings In Chicago.