• Weekly Roundup and Plastic bag fees and bans

    New York’s Bag Fee Fight

    Apr 25 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Developing Economies, Economic Thinkers, Environment, fiscal policy, Government, Lifestyle, Regulation, Thinking Economically • 75 Views

    “There’s a bad tree at the corner of—wait, excuse me, I misspoke. There are no ‘bad trees,’ just trees with bad litter in them.”

                                                                                        Melissa Elstein, a New York plastic bag snagger

    New York is having a B.Y.O.B debate. Soon to be decided by the City Council, Intro 209 mandates a five-cent plastic bag fee. If passed, the ordinance will create a Bring Your Own Bag incentive. As one NYC councilwoman explained, after having to pay the ten-cent fee in San Francisco, she brought her own reusable bags when shopping. “The San Francisco experience made me see that the fee does have the potential to change your habits.”

    The Plastic Bag Debate

    Everywhere the mandate is debated, someone expresses concern that the fee is regressive because those who earn less lay out a higher proportion of their income. Opponents also remind us that plastic bags might not be biodegradable but 40 year-old hot dogs remain in land fills also (as surely do Twinkies). Meanwhile bag makers cite job losses and even environmentalists say that plastic bags compose a small part of our trash.

    Plastic bag fees


    Still, It is tough to ignore the revenue a ban or fee generates and all of the plastic bags that tangle in trees, clog waterways and wind up in land fills. As a result, the pro-side of the plastic bag debate has been sufficiently persuasive to prevail in places that range from Portland, Oregon and Washington D.C. to Mumbai and Uganda. Last October the British said yes to a five-pence charge (about 8 cents) while in California, although Governor Brown signed a single-use plastic bag ban, opponents had enough signatures to get it on the ballot next November.

    Our Bottom Line: Pigovian Taxes

    First described by British economist Arthur Pigou, a tax levied on a good or service that creates a negative externality has a dual benefit. It diminishes how much we use the item that harms us while raising revenue that a community can use productively.

    So if New York passes its 5-cent bag fee, we can hope that its Pigovian benefits outweigh its costs.

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  • Weekly Roundup and Skyscrapers and business cycles

    When Not to Build a Super Tall Skyscraper

    Apr 24 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Developing Economies, Economic Growth, Economic History, Financial Markets, fiscal policy, Government, Innovation, Labor, Lifestyle, Macroeconomic Measurement, Regulation, Tech, Thinking Economically • 75 Views

    The 101 story skyscraper that was completed in Taiwan in 2004 had to sway but not too much. Called Taipei 101, it needed the sway if an earthquake struck but had to limit its flexibility during a typhoon because people would get seasick. The solution was a mass damper. Sort of like a 728 ton pendulum, a mass damper is a counterweight that “lags” the movement of the building.

    In the diagram below you can see that they placed the mass damper close to the 87th floor. And then next, we have a 2007 photo of Taipei 101.

    Skyscrapers and business cycles

    From: 99% Invisible

    Skyscrapers and business cycles

    From convincing tenants the building would be safe to adjusting flight paths to finding investors, the logistics were daunting. But they were no different from other super tall building projects.

    Where are we going? To the correlation between super tall building construction and business cycles.

    A Sentiment Index

    We could use super tall building projects in a sentiment index. Requiring huge funding, money has to be available from confident investors. Typically also, the sponsors want to make a statement about global power and success that corresponds to a prosperous era. Whether representing a corporation, a city or a nation, a super tall building can reflect the (inflated?) optimism that accompanies economic expansion.

    A super tall building for its era, NYC’s Singer Building was completed in 1908. The world’s tallest building for only a year, the Chrysler Building opened on May 28, 1930. Meanwhile, we had the Sears Tower in 1974, Kuala Lumpur’s Petronas Tower, 1997, the building of Taipei 101 spanning 1999-2004 and Burj Khalifa, the United Arab Emirates, 2010. All indicated a peak in optimistic economic sentiment.

    The decline followed soon after.

    We had a banking crisis in 1907, the great depression during the 1930s, stagflation from the 1970s-1982, an “Asian Contagion in 1997-1998, the tech bubble in 2000 and the great recession from the end of 2007 to June 2009.

    Our Bottom Line: Business Cycles

    As the four stages of a business cycle–peak, contraction, trough, expansion–unfold, super tall skyscraper construction can provide signals about where the economy is going.

    For the buildings that I selected, each was completed when an economic boom collapsed. I know some of this is “cherry picking” statistics because not all super tall buildings were built during the end of an economic expansion. However, we can say that super tall building construction tends to occur when loanable funds are available and investors are willing and able to support capital expansion. And that optimism does coincide with the expansionary phase of the business cycle.

    So, when not to build a super tall skyscraper? I guess we need a crystal ball.

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  • self-driving cars

    A Closer Look at Self-Driving Cars

    Apr 23 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Economic Debates, Economic Growth, Government, Innovation, Labor, Lifestyle, Regulation, Thinking Economically • 87 Views

    Asked who pays the summons when an autonomous vehicle (AV) goes through a red light, Google (Alphabet) co-founder Sergey Brin said, “Self-driving cars do not run red lights.”

    It sounds simple. But it is’t.


    Different from GPS, the mapping that an AV needs combines software and people to achieve much more precision.

    As you can see below, GPS does not exactly know the car’s location:

    Self-driving cars and mapping

    From: Youtube “SXSW Google Self-Driving Car Project”

    Like GPS, Google’s maps for its self-driving vehicles do have to consider addresses, street layouts and highway entrances and exits. But also the minutiae are a part of driving. Behind the wheel, we notice a disappearing lane, a fire hydrant, a bush, a mailbox, a speed bump. In addition, an AV needs to know the width of an intersection and the height of a curb. It has to recognize the part of the street that is unchanging, other characteristics that are temporary like construction zones and some that are momentary like a child running to get a ball in the road.

    To map all of this, Google first drives through an area, street by street, with lasers that send data to their cars’ sensors. The result is a detailed three-dimensional picture that people and software update. On the road, cars match those updates with their own real-time driving data.

    What is an Autonomous Vehicle?

    The Google self-driving car would be called a Level 4 vehicle by the NHTSA (National Highway Traffic Safety Administration).

    The Debate

    In the AV community, we have two groups:

    One perpetuates human involvement. Yes, a car can be automated but always a human can intervene. Perhaps ultimately only for emergencies and then not at all, the AV will reach the point of less and less human involvement but the transition will be gradual.

    The second group envisions total autonomy from the start. The car is the driver. That’s it.

    The Definition

    Over at NHTSA, these are the four levels of autonomous vehicles:

    NHTSA’s self-driving/AV vehicle scale:

    Levels of self-driving cars

    From: leftlandadvisors

    Our Bottom Line: Creative Destruction

    First described by economist Joseph Schumpeter (1883-1950), creative destruction details the painful process through which innovation structurally transforms an economy with new technologies and jobs. Whoever wins the AV debate, still we will have a long list of changes that influence the path of creative destruction.

    On the government level, regulatory policy will have to change because the separation between car (overseen by federal agencies) and driver (a state responsibility) will no longer be clearly defined. Then, in addition to mapping, there will be new requisites for vehicle design (that might be daunting for GM and Ford), upkeep and ownership and also for commuting, for parking…the list is endless.

    But its one common thread is creative destruction.

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  • Weekly Roundup The econlife.com economics news summary

    Weekly Roundup: From Russian Vodka to Venezuelan Beer

    Apr 22 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Developing Economies, Economic Debates, Economic Growth, Economic History, Economic Thinkers, Entertainment, Financial Markets, fiscal policy, Gender Issues, Government, International Trade and Finance, Macroeconomic Measurement, Money and Monetary Policy, Regulation, Thinking Economically • 71 Views

    Weekly News Roundup

    New 10 dollar bill Sunday 04.17.16

    Why we needed “Hamilton”…more

    Cigarette taxes and impact of sin taxes Monday 04.18.16

    The basics of cigarette taxes…more

    Weekly oundup and Interstate Migration Tuesday 04.19.16

    How moving matters…more

    Weekly roundup and Russian alcohol consumption Wednesday 04.20.16

    Russian vodka economics…more

    Weekly roundup and designing currency Thursday 04.21.16

    Dollar design decisions…more

    Weekly roundup and Foreign exchange and Venezuela's beer shortage Friday 04.22.16

    Why oil caused Venezuela’s beer shortage…more

    Ideas Roundup

    • externality
    • money supply
    • sin taxes
    • demand elasticity
    • tradeoffs
    • comparative advantage
    • national market
    • transportation infrastructure
    • price ceiling
    • incentives
    • foreign exchange
    • subsidy

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  • Weekly roundup and Foreign exchange and Venezuela's beer shortage

    Venezuela’s Beer Problem

    Apr 21 • Businesses, Demand, Supply, and Markets, Developing Economies, Economic Growth, Economic History, Financial Markets, Government, Regulation, Thinking Economically • 85 Views

    We can add beer to our list of Venezuela’s economic casualties. One reason is the plunging price of oil.

    This is the story…

    On a macro level, the statistics are dismal. Inflation is projected at 500% this year while GDP will probably shrink by 8% after a 5.7% decline last year. The subsidies for gas, housing, medical care that an oil rich economy had supported are no longer affordable.

    On a micro basis, attempts by the government to control inflation with price cap ceilings have resulted in shortages of most everyday items ranging from toilet paper and rice to pharmaceutical necessities and water. In addition, businesses, malls, and households have had to cope with regularly occurring electrical outages.

    And now beer.

    Venezuelans are big beer drinkers–#1 in a list of South American countries. The problem is they were using foreign exchange from oil sales to support their beer habit. When oil revenue plunged, the foreign exchange supply shrunk. Still all was okay because Venezuela’s big beer firm, Empresas Polar, said it would manufacture more beer at home. Now though they have announced they don’t even have enough dollars to pay for the malted barley imports they need. On April 29th, with foreign exchange having dried up, so too will their beer supply.

    Our Bottom Line: Foreign Exchange

    Venezuela has an official exchange rate, two that apply to individuals and businesses, and one for its black market. So, one dollar can equal 200 bolivars. But if the government wants to import food and medicine, the rate instead is approximately 6.3 and 13.5 bolivars to the dollar. Meanwhile the black market dollar rate is now close to 1000 bolivars.

    The result? Creating perverse incentives, government currency control has totally distorted market signals.

    No wonder it is impossible to get malt.

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