Sunday, January 31, 2010
Tuesday, January 26, 2010
The rap is now completed and has been posted to ever reliable Youtube and is available below the fold.
Saturday, January 23, 2010
You can read Chapter Ten from John McMillan's super book on markets, Reinventing the Bazaar, here. The chapter deals with externalities and considers three examples of externalities
- Driving and Congestion
- Overfishing and Decling Fish Stocks
- Wages in Sport and Competitive Balance
An excellent artice was on conservation methods in fisheries was published in The New York Times Magazine a few years ago. A Tale of Two Fisheries looks at formal and informal conservation methods. Some quotes from it are used by John McMillan. For example:
Road pricing is a method to try and internalise the costs drivers impose on others and to encourage more efficient use of the road network. London use a congestion charge for cars entering the centre of London, and makes some mild claims about it's effectiveness. The problem with the London congestion charge is that it is too blunt a tool. It is a fixed charge that does not respond to demand and increased congestion. When roads are moving freely the congestion charge should be low, when roads are choked the charge should be high to encourage drivers to find alternatives. This is the basis of Vickrey congestion pricing.
Singapore is one of the best examples of Vickrey pricing in action. Here is a recent report from the Financial Times and the video below the fold gives a television news report on the charges.
Friday, January 15, 2010
"In 2008, the effective rate of tax on profits (including that declared by the self employed) amounted to a miniscule 10.3% (approximately €6 billion tax out of €58 billion profits). The corresponding figure for wages including PRSI is 28% (€22 billion tax out of €79 billion in PAYE wages). If profits in 2008 were taxed at the same effective rate as wages, a rate that would still be less than the US and the rest of the EU 15, an extra €10 billion would have been available to the exchequer."This was repeated by Stephen Boyd in another piece and used by Mick Murphy on a recent appearance on Newstalk's The Right Hook. Listen here (start at 7:30 into the segment to get the relevant piece).
There is much to admire about Joe Higgins. He is a brilliant orator and is a loss to parliamentary politics in Ireland. He has great energy and his work and support for the less well off in society is admirable. Every society needs a Joe Higgins. Unfortunately he tends to talk an awful lot of rubbish, such as the claptrap above.
Thursday, January 14, 2010
However, society incurred a huge cost of this action through what we would call a consumption externality. The cost to society of all the water wasted as thousands of taps were left running. There is no individual incentive to conserve water in Ireland. Remarkably for a country that rarely suffers from a shortage of rain we are in the midst of a water shortage. People leaving taps running during the cold spell now means that we are rationing water.
Tuesday, January 12, 2010
If I hear one more Democrat (and occasional Republican) in the House or Senate condescend to business, I am going to throw up. Today it’s insurance and drug companies, tomorrow it’s oil producers, toy companies, banks, chemical manufacturers, or any number of other enterprises that offer necessary or simply life-enhancing products and services. The preening self-righteousness towards for-profit economic activity is not specific to any particular legislative initiative such as “health care reform,” it is part of the psychological make-up of many politicians and huge swathes of educated professionals, including virtually the entire academic world and non-profit sector, the media, and many high-paid lawyers. It is simply unbearable to hear these sheltered senators and congressmen look down upon people who have had the guts to try to create something that other people want to buy; who have had to figure out intricate supply chains and methods of financing; who have had to organize and motivate their employees; and who take financial risks with no guarantee of reward. For the anti-business mindset, the fact that businessmen need to make a profit in order to continue operating renders them prima facie suspect, if it doesn’t outright undercut any claim that they might have to contribute to the public good.A a film version of the speech from the 1951 film Home Town Story is available below the fold.
Sunday, January 3, 2010
This graph gives the total amounts of deposits and loans of Irish residents in Irish financial institutions.
The Central Bank do not present the data in a manner that makes it easy to work with but we can extract some information from it. By combining the data in the current release with the numbers presented in a previous release (September 2006) we can present monthly information beginning in June 2003.
First, we can look at the number of credit cards in issue.
Saturday, January 2, 2010
A BBC News video reports that one time coffee exporter, Venezuela, is now importing coffee. The reason for this is attempts by Hugo Chavez's regime to control the market through price ceilings. A coffee producer in the video states:
"The prices for producers are below the costs of production. Two years ago it cost me just over six dollars to produce a kilo of coffee. Today the state pay a fixed price of four and half dollars per kilo. I was losing money by producing coffee."Not suprising most producers have responded by cutting production. In the same piece the Venezuelan Agriculture Minister, Elias Jaua, argues that:
"The price controls are a guarantee that the Venezuelan people have the right to food and the government compensates the producers by direct and indirect subsidies. That way, producers have a fair income and people have that sacred right of access to basic foods."The Finanical Times has a piece that describes another unintended consequence of these price controls.
Price controls have made matters worse. Increasing amounts of coffee – and many other goods – are smuggled abroad to be sold at international prices. “Of course there’s contraband. What does Chávez expect when you can sell coffee in Colombia for double or triple the price?” said one coffee producer, who requested anonymity.
Even with rising domestic demand it is expected that Venezuela's coffee production will be about 38,000 tonnes this year, down 70% from its peak. This compares to a 55,000 tonnes level of demand in the country. More data are available here. The shortfall has to be imported and the Venezuelan government cannot fix the price of imports but that doesn't mean they're not trying.
As the self-prolaimed Indiana Jones of International Finance, Robert P. Smith, says:
"In trying to organize and protect domestic industries with the blunt instrument of state policy, Chavez has once again fallen prey to the law of unintended consequences.Tweet
The market is there, globally – but it’s been badly distorted. In trying to fix domestic coffee production, the Venezuelan leader has exacerbated the very problem he set out to cure."