• Everyday Economics and the opportunity cost of eliminating gestation crates is less than what we sacrifice by keeping them.

    Why Humane Treatment is Good Economics

    Nov 16 • Businesses, Demand, Supply, and Markets, Developing Economies, Economic Debates, Environment, Government, Innovation, Labor, Macroeconomic Measurement, Regulation, Thinking Economically • 275 Views

    By Elizabeth Fournier (recently interviewed by Bloomberg for her work with pig advocacy) with Elaine Schwartz

    Below is a “pig map,” which shows the density of pigs in the world. You can see the dark green in Europe and the United States, which represents over 250 pigs per square kilometer. What’s the difference between the two? In the United States, pigs are confined to gestation crates.

    The opportunity cost of eliminating gestation crates is less than what we sacrifice by keeping them.

    From: From: “Mapping the Global Distribution of Livestock” by Timothy P. Robinson et al.

     

    Where are we going? To why gestation crates are not only inhumane, but are also not economically advantageous.

    Humane Treatment is Good Economics

    During the three delicate months of their pregnancies, mother pigs are confined to gestation crates. These metal cages, which are usually six feet by two feet, provide these intelligent creatures with nearly no room for movement. Keep in mind that most mother pigs are bred eight times before being slaughtered, and are more intelligent than your cats and dogs at home. Although some members of the pork industry may disagree, gestation crates are both inhumane and not economically viable.

    An alternative to gestation crates, “group housing,” can vary slightly depending on pen layout and group size but allows mother pigs to move and interact with each other.

    Iowa State University recently completed an economic comparison between gestation crates and group housing. They tracked 353 sows, and found that “reproductive performance can be maintained or enhanced in well-managed group housing systems… without increasing labor” and that “group housing… resulted in a weaned pig cost that was 11 percent less than the cost of a weaned pig from the individual stall confinement system.”

    The European Union and nine states have already outlawed the use of gestation crates. Backed by public support, a bill is currently waiting for Governor Christie’s signature in New Jersey.

    Our Bottom line: Opportunity Cost

    What exactly is the opportunity cost of switching to a more humane method of confinement for mother pigs and is it worth the sacrifice?  Comparing individual confinement structures and group housing, the Iowa State University study concluded that group housing costs less to build, farmers had more weaned pigs at a lower total cost, and operating costs were similar for both approaches. Even if treatment of pigs isn’t your main concern, if you care about economic efficiency, you will oppose gestation crates.

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  • The econlife.com Weekly Roundup

    Our Weekly Roundup: From Bank Regulation to Water Taxation

    Nov 15 • Behavioral Economics, Developing Economies, Economic Debates, Economic Growth, Economic History, Economic Thinkers, Environment, Financial Markets, Government, Labor, Macroeconomic Measurement, Money and Monetary Policy, Regulation, Thinking Economically • 228 Views

    Our Posts Roundup

    Everyday economics and the minimum wageSunday 11.09.14 Why we can’t agree on the minimum wage…more

     

    More people vote when they believe it is a social norm.Monday 11.10.14 The big impact of a small voting sticker…more

     

    Everyday economics: China's tragedy of the commons.Tuesday 11.11.14 How China’s air pollution is a tragedy of the commons…more

     

    Everyday Economics of Dodd-FrankWednesday 11.12.14 What happened to Dodd-Frank…more

     

    Everyday Economics: Because water is not a public good, neither Ireland nor Detroit need provide it without charging.Thursday 11.13.14 Deciding whether we deserve free water…more

     

    Cost benefit analysis of our behavior when we negotiate at home and at work would reveal inaccurate self-awareness.Friday 11.14.14 The cost of mistaken self-awareness…more

     

     

    Ideas Roundup

    • confirmation bias
    • minimum wage
    • price floor
    • cost-benefit analysis
    • social norms
    • negative externalities
    • tragedy of the commons
    • financial regulation
    • unintended consequences
    • public goods

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  • Cost benefit analysis of our behavior when we negotiate at home and at work would reveal inaccurate self-awareness.

    In negotiations, better to be Goldilocks or a bear?

    Nov 14 • Behavioral Economics, Businesses, Labor, Lifestyle, Thinking Economically • 131 Views

    Assertiveness is sort of like Goldilocks. Too much or too little and you do not get what you want. Only just right really works.

    In a new study from Columbia, researchers asked us to imagine a bell-shaped curve with success as the vertical y-axis and pushiness as the x-axis. As you move up the curve success and pushiness both increase. Then though, the curve heads south on the success scale as “pushiness” continues to rise.

    How to know when you have reached an optimal amount of assertiveness that brings success in negotiations? That is the problem.

    Self-Awareness Problems

    The study from Columbia was about our lack of self-awareness. In laboratory simulations and through questionnaires researchers found that relatively frequently, people inaccurately perceived their own assertiveness.

    The misjudgment takes place in two ways. Thinking our negotiating has been too pushy, not pushy enough, or just right, we incorrectly assess the way we act. Also though, we incorrectly perceive how our adversaries judge our behavior. For example, in one experiment, 19 percent of the participants said they were over-assertive, but 41 percent believed their “adversary” perceived them as over-assertive. Even more interesting, the people who behaved appropriately (according to their counterparts) thought they were perceived as too pushy. Or, as the authors of the paper said, “… we may live in a world of oblivious jerks and unwitting pushovers, with many people assuming their assertiveness, like Goldilocks’ porridge, is just right.”

    This diagram displays the results of one of their experiments:

    Cost-benefit analysis reveals the cost of inaccurate self-awareness.

    From: “Pushing in the Dark: Causes and Consequences of Limited Self-Awareness for Interpersonal Assertiveness” by D.R. Ames and A.S. Wazlawek. (Circle size indicates number of participants.)

    Our Bottom Line: Costly Negotiations

    Mistaken self-awareness can be costly. Not knowing when we should tone down our assertiveness, move it up a notch, or maintain it, we behave inappropriately. The result? When we negotiate suboptimally, we diminish whatever we will take home from that salary meeting, divorce settlement, takeover bid or those climate change talks.

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  • Everyday Economics: Because water is not a public good, neither Ireland nor Detroit need provide it without charging.

    Should Water Be Free?

    Nov 13 • Behavioral Economics, Demand, Supply, and Markets, Economic Debates, Economic History, Environment, Government, Regulation, Thinking Economically • 225 Views

    Chanting, “Fight, fight; water is a human right,” hundreds marched in Detroit during July.

    If you had not paid your water bill, Detroit was going to turn it off. One resident explained to Planet Money that she had to choose between the gas she needed to drive to work and her water. Gas won, the water was shut down, and she even tried collecting rain water to flush a toilet.

    Meanwhile, protesting Ireland’s decision to start charging for water on October 1, 2015, a leader of Right2Water said, “We believe water is a human right.”

    Where are we going? To whether water is a public good for which government should pay.

    The Free Water Debate

    By privately paying for water, households help the environment and add to government revenue. When your water costs more, you use less. A perfect example of the law of demand, Ireland uses two or three times more water than her EU neighbors because Irish water is free. They don’t even have water meters. In addition, a revenue stream for water frees other money for use elsewhere.

    By contrast, when taxes are used for water provision, our treatment and distribution facilities become a social resource. Consequently, we wind up transferring wealth from the haves who paid the tax dollars to the have-nots if government pays our water bill. Also, if water is a human right, then we would be creating a valid entitlement.

    Our Bottom Line: Is Water a Public Good?

    Economists like to say that a lighthouse is a public good because it can simultaneously be used by everyone, depleted by no one, and is a necessity. Perhaps though because lighthouses have been privately owned, a municipal tornado alarm is the quintessential public good. Everyone hears it, use does not deplete it, and we need it.

    With water we could use the same criteria. Getting an “A” only for “necessity,” water does not pass the public good test.

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  • Everyday Economics of Dodd-Frank

    Dodd-Frank: When Is A Law Too Long To Obey?

    Nov 12 • Economic History, Financial Markets, Government, Macroeconomic Measurement, Money and Monetary Policy, Regulation, Thinking Economically • 219 Views

    It’s been more than four years since Dodd-Frank was passed. Composed of 2,300 pages, the Act is supposed to prevent a repeat of the 2007-2009 financial crisis by increasing financial stability. The problem, though, is that Dodd-Frank describes 398 rule making requirements. The next step was to make those rules.

    So, how are we doing?

    Let’s start with two words and four categories that can describe the over all purpose of the legislation:

    The Words:

    1. Risk: Lawmakers wanted to manage the impact of the risks taken by financial institutions.
    2. Protection: Lawmakers hoped to protect consumers from making unwise financial decisions.

    The Categories:

    1. Government: Its powers are multiplying.
    2. Banks: Financial firms are experiencing new trading restrictions and capital requirements.
    3. Consumers: A new bureau to protect consumers has been established.
    4. Investors: Different investing groups such as hedge funds, people who give investment advice, insurance companies, and those who create securities packages have new constraints.

    Dodd-Frank Rule-Making Progress

    Next, we can go to (law firm) Davis Polk’s monthly Dodd-Frank progress report. Looking at rule making in selected areas, you could say that banking regulators have made the most headway:

    Financial regulation progress through Dodd-Frank

    From: Davis Polk

     

    Dodd-Frank Economic Impact

    Switching our perspective to Dodd-Frank’s success, we can refer to a Brooking Institution analysis that conveys a mixed review. Their “wins” primarily involve banks and consumers.

    Financial regulation update on Dodd-Frank

    Financial Regulation update on Dodd-Frank from Brookings

    From: Brookings Institution

    A Mayor Michael Bloomberg Opinion

    And finally, the last word from Mayor Bloomberg. Summarizing his opinion of Dodd-Frank with one word–dysfunctional–former Mayor Michael Bloomberg added, “What happens is every little group in Congress has to add something to that bill in return for their votes, and a lot of those things are just mutually exclusive. Years later now we don’t have the regulations that are required and complying with it is just really impossible.”

    Our Bottom Line: Unintended Consequences

    Compared to other financial regulation, Dodd-Frank is long. When you have a 2300 page law that, a year ago, had almost 14,000 pages of rules and they were below the halfway mark, I become concerned with unintended consequences. Faced with higher costs when they comply with legislation, they have already begun to charge us more.

    Length of Financial Regulation laws

    From: Carpe Diem, Mark Perry Blog

     

     

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