Friday, July 25, 2014

The Economics of Star Trek: Proto-Post-Scarcity?

This piece starts with two premises that really interest me 1) That the Federation in Star Trek doesn't use money (this bothers me) and 2) That technology will soon make us exponentially more productive (this I find plausible).

And tries to bring those two together. I don't like his conclusions though. I do like the line "The Federation seems a bit like Williamsburg — a lot of artists who don’t need to work." But his idea that food is apparently free because its so cheap (plausible) but that computers in the background keep track of how much you eat to make sure you don't eat too much (why bother). I do find it plausible that "cheap things" (anything that costs less than $1000) would be so insignificant, like pennies that people wouldn't bother keeping track of them. I also agree that expensive things, like starships, couldn't possibly be free.

But he calls Star Trek a post-scarcity economy and that just isn't possible. There will always be a scarcity of reservations at the hottest restaurants (ok, maybe that is allocated by lottery like we often do now), but other things like Jake and the antique baseball card (in the DS9 episode that showed the absurdity of a barter economy), or Picard's Chateau in France. We still need money (Federation credits) for that, not just as foreign exchange.

Wednesday, July 16, 2014

The true externalties of a burger?

I applaud Bittman's valiant effort to calculate the true externality cost of a burger. Too often people make a big deal of externalities that really only add up to pennies. However the numbers he comes up with is a vast over-estimate.

The numbers don't add up. First of all, counting burgers as 11% of the obesity epidemic is way too high. Burger calories is really only a small portion of fast food calories (soda and fries are greater). And not all calories contribute to obesity. Only surplus calories. Calories eaten to keep us at a healthy weight should not count. So really the obesity calculation is maybe 10 times too high. Similarly, I checked the math on the carbon calculations. The White house number is actually fairly middle of the road. A summary of the academic literature (see Tol 2008 and follows up) finds numbers much lower than the White house number (and much lower than those produced by special interests groups). So I'd call the 15 cents for the price of carbon an upper bound. But even using the White House number, the math seems off, a quarter pound of burger (the weight of cheese here is small) is 0.0028 metric tons * $37, that's only 10 cents of externality, not the 15 cents he states.

Friday, July 11, 2014

The perils of French Socialism : Bookstore edition

This article in the NY Times claims to refute caricatures of socialistic Paris, but seems to do the opposite. France has passed laws to keep book prices high, in a bid to save a handful of bookstore owners. While I too mourn the end of bookstores, as an economist, I feel for the millions of French book consumers forced to pay higher prices. It is basic supply and demand. In the US where books are cheap, lots of people read. 76% of Americans read a book last year which is higher that most countries in Europe .Although France is not in that dataset for some reason, I couldn't find the data on France specifically, but I wouldn't be surprised if the numbers of book readers are lower in France.

Tuesday, July 08, 2014

Is it time to give up on pricing Carbon?

I've been coming to this conclusion for a while (summarized in this Tech Review article), that a price on carbon while great and likely first best, is futile given the political constraints of our global democratic system and just wasting political capital. I think the Obama Administration has come to this conclusion as well.

Ever since being there for the breakdown in talks at Copenhagen, as well as having my RAs comprehensively surveying the existing policies pertaining to climate change back at the CEA, I have come to two conclusions:

1) The political constraints are intense and binding
2) The impact of the optimal carbon price is quite small relative to existing policies.

While 2nd best, I don't think the lack of a global carbon price would be so consequential. Instead of carbon prices, we have loads of other existing policies like tax credits and fuel economy standards and renewable power mandates that put a effective price of carbon in many cases about an order of magnitude HIGHER than they need to be.

It is hard to imagine that instituting the optimal carbon tax which would raise coal electricity prices by say about 10-20%, would have much more effect on our energy system compared to the wild price swings from natural gas, or the massive tax credits and renewable mandates that have much larger effects on prices and quantities.