Worthwhile Canadian Initiative

A plug for optimal currency areas

 

Pictured on the right is my current collection of plugs and chargers - North American-type plug for (locked) Canadian cell phone, UK type plug for UK phone, charger with Europlug for South African phone (not ideal, but the phone was only $15), plus a UK and South African adaptor thrown in for artistic effect.

The theory of optimal currency areas should apply to electric current and plugs, too. Multiple plug types, like multiple currencies, impose costs on travellers, and are a barrier to trade. This argues for widespread plug standardization. So why does it face resistance? Is there a potential difference between currents and currency?

Take that, Steve Saideman

My colleague, Steve Saideman, has a thing about milk in bags. On Saideman's Semi-Spew he claims that, as compared to gallon milk jugs, they're an "inferior technology." They're not even good for the environment because "bags in which milk may be delivered have no other purpose.  A gallon jug, on the other hand, has a vast array of re-purposes." 

The "real superiority", Steve argues, of gallon jugs is their ease of use:

one can simply open a gallon jug of milk and pour.  If you have bought bags of milk, you need to get a container, make sure it is clean, open the bag without spilling anything (no crying necessary with a gallon jug), pour it into the container and then pour some of the contents into one's bowl of cereal.

Why Is Manufacturing Special?

Andrew Coyne has an excellent piece in the National Post dealing with why there are no good reasons for corporate handouts in the wake of yet another round of assistance to the automobile sector.  He asks what the economic rationale for this assistance is – that is, what is the economic value?  He argues that what passes for economic arguments in support of corporate assistance and bailouts really are but “pseudo-arguments”.  For example, we must subsidize the auto industry because we must be in the automobile business – in essence, the auto industry is special.  Or, other countries are assisting their manufacturing sectors with subsidies so we need to do so to compete.

Harmless remedy or dangerous pharmaceutical?

In Canada, melatonin is deemed to be a "nutritional supplement." It's sold in most pharmacies and health food stores as a natural and healthy way of overcoming jetlag or ensuring a good night's sleep.

In the UK, melatonin is a harder to come by. In 1995, its designation was changed from nutritional supplement to "medicinal product", which meant that it could no longer be sold alongside vitamins in the health food store. Yet - in a classic Catch-22 -  because melatonin was not licensed to be sold as a medicine, was hard to obtain on a prescription basis also (this article describes the late 1990s through to late 2000s system).

The Macroeconomics of Middle Earth

Smaug the dragon is typically viewed as a fiscal phenomenon, depressing economic activity by burning woods and fields, killing warriors, eating young maidens, and creating general waste and destruction. Yet peoples - whether elvish, dwarvish, or human - have considerable capacity to rebuild. Why did the coming of Smaug lead to a prolonged downturn in economic activity, rather than a short downturn followed by a period of rebuilding and growth?

Does not ship to this address

Dad wants a golf ball retriever for Christmas. I found the perfect one on Amazon - the #1 selling Callaway 15 foot golf ball retriever for $27.80. But when I went to check out my purchase, the dread message appeared: "Does not ship to this address." I had been browsing on amazon.com, not amazon.ca. 

The Shopping Cart Puzzle, or Intermediate Micro takes on Behavioural Economics

Today's typical grocery store shopping cart is much larger today the shopping carts of yesteryear. The question is: why?

A behavioural economist would observe that people buy more when shopping carts are larger. For example, an AER article by Wansink, Just and Payne notes:

....consumption can also be unknowingly influenced by environmental cues—benchmarks or reference points—that may subtly suggest a consumption norm that is appropriate, typical, reasonable, and normal. ....large packages, plates, serving bowls, and even pantries have all been shown to increase how much a person serves and consumes by 15 to 45 percent

If grocery stores figure that larger shopping carts translate into higher sales volumes, one might expect them to increase cart sizes. 

Egalitarian airlines

Jules Dupuit gave the classic account of the indignities of second class travel, and the economics behind them:

It is not because of the few thousand francs which would have to be spent to put a roof over the third-class carriage or to upholster the third-class seats that some company or other has open carriages with wooden benches … What the company is trying to do is prevent the passengers who can pay the second-class fare from traveling third class; it hits the poor, not because it wants to hurt them, but to frighten the rich … And it is again for the same reason that the companies, having proved almost cruel to the third-class passengers and mean to the second-class ones, become lavish in dealing with first-class customers. Having refused the poor what is necessary, they give the rich what is superfluous.

The students' dilemma

Imagine a world where education is of no intrinsic value, and serves only as a signal of an unobservable character trait called "ability." Performance (which can be observed) is determined by both ability and effort. Effort is costly. Some students have a high level of ability, and some have a low level of ability. A professor's job is to rank them. Professors cannot recognize absolute excellence, only relative excellence, and so grade on a curve.

Bond Villains as Fiscal Stimulus

I’ve known my friend Harold since high school and over the years both of us have given a lot of thought to the problems of the Northern Ontario economy while watching much of its traditional economic base in resource extraction and processing slowly disappear.  Harold has spent a good many years in the economic development field and recently shared with me some partly tongue in cheek thoughts that what most depressed rural remote economic areas need is a good Bond Villain to pick things up. 

Why politicians court the middle class

Raphael Deketele, a student in my fourth year honours seminar, just unearthed a strange finding from the 2006 World Values Survey (WVS).

The WVS interviewed over 1000 Americans, and asked them:

Here is a scale of incomes on which 1 indicates the “lowest income decile” and 10 the “highest income decile” in your country. We would like to know in what group your household is. Please, specify the appropriate number, counting all wages, salaries, pensions and other incomes that come in.

An Economic Salute to US Presidents!

Well tonight is the next US Presidential debate and what better way to help set the stage than an economic retrospective on American Presidents and their relative performance when it comes to economic growth.  I went onto Eh.Net and have obtained real per capita US GDP in 2005 constant dollars for the period 1790 to 2010 and used it to calculate the annual growth rate of real per capita GDP.  From this, I then calculated the average annual growth rate for real per capita GDP for 44 US Presidents and ranked them from highest to lowest. 

Is the Stationary State Coming?

Robert Gordon has recently published an NBER paper titled “Is U.S. Economic Growth Over? Faltering Innovation Confronts the Six Headwinds”.  The paper questions the universal assumption that gained currency in the 1950s with Robert Solow's work that economic growth is a continuous process that will persist forever.  Indeed, Gordon suggests that the past 250 years could be a very unique period in human history and we will be returning to an era of low economic growth – a state that has characterized human history prior to the 1750s.  For example, the UK’s real per capita GDP grew at an annual rate of 0.2 percent in the four centuries leading up to 1700.

Office hours: an accidental experiment

Every year I conscientiously hold office hours, and every year only a few students take advantage of them. The TAs' offices are just as empty. Some students even pay for private tutoring, instead of taking advantage of the free services provided by the university. 

This week, however, I carried out an accidental experiment.

The economics of paywalls

With on-line advertising revenues stagnant at best, and print in terminal decline, newspapers are starting to build paywalls. 

The economics of on-line media is a little different from the economics of print, and a lot different from the economics of, say, potatoes. The difference is shown in the diagram below. 

Too much stuff: the deadweight loss from overconsumption

In a simple supply and demand world there are two sources of waste.

Underconsumption is the first. It occurs when taxes, price ceilings, price floors or other interventions prevent the economy from reaching the free market equilibrium. Consumers would like to buy, suppliers would like to sell, but they cannot make a mutually beneficial exchange because there has been interference with the market.

The unbearable richness of biscuits

Last summer I picked up an old, well-thumbed, Magic Baking Powder Cookbook. Judging by the cover, and the inclusion of recipes that "won first prize at the 1931 Canadian National Exhibition", I would guess that the recipes in the book date from the 1930s or 40s.

Elinor Ostrom, you were turtley right

Mother turtle laying eggs on banks of Rideau River

Elinor Ostrom, Nobel-prize winning political economist, died on June 12, 2012. That same day, a mother turtle pulled her way out of the Rideau River, and made her nest on the river bank.

 

A turtle's idea of a good nesting place is somewhere with soft, loose earth, sand or gravel. For an urban turtle, that means, say, a playground sandbox, or some freshly-turned up earth on a construction site. The turtle pictured made her nest on nice bit of fresh gravel right beside a road, just off a popular dog-walking trail.

A turtle nest can be seen as a common property resource. A long tradition in economic thought argues that such resources will inevitably be neglected, untended, and over-exploited. Turtle eggs will be dug up by dogs, trampled on by careless walkers, or harvested by people dedicated to eating local, organic produce - the tragedy of the commons.

Economic Forecasting: Is Google Trends the Future?

Google Trends is a quick and popular way to assess the importance of ideas, events and trends by looking at the results of people’s web searches.  In fact, as is well known, it has been used to study flu activity based on searches for flu related terms. And, right here on WCI, it has been used to study marital discord  and the holiday spirit. Indeed, it can also provide economic information and is apparently even becoming a way to supplement economic forecasting tools.  If the searches for something are trending up, it is suggestive that it is growing in importance as an economic force.

Taxpayers need warm glows too

Charles Sonnibank, D.D. by deed dated October 1635, bequeathed a reserve rent, out of land at Broome in the Parish of Hopesay, of 13 pounds, 6 shillings, 8 pence to be paid quarterly at the Rectory to Ten Poor Widows of Ludlow, the Rector to retain 6 shillings 8 pence for his care in receiving it.

Education for the poor, and support for the elderly, have been publicly provided for centuries. Historically churches raised much of the funding for these activities; today governments do.